capital city bank group, inc. 2007 annual report

annual report 2007

Every day, Capital City Bank associates strive to make a difference in every life we touch. We share every need, every goal and every dream of our friends, partners and colleagues. The relationships we build with the young professional who just landed her first job, the business owner looking to expand his company or the client saving for her future, inspire us to always put our clients first and offer the best products and services available.

Capital City Bank Group | 2007 Annual Report | Page 1

Bradford Lewis

As a life-long Capital City Bank client, Bradford knows the value of strong relationships with his bankers. He recently came to Capital City to secure a loan to develop The Alliance Center — a 73,000- square-foot, mixed-use commercial building — in the heart of downtown Tallahassee. With this loan, Capital City joins Super Holdings, LLC, Red Brick Partners and the Downtown District Community Redevelopment Area in efforts to grow Tallahassee’s thriving downtown area.

Is important. Capital City bankers work closely with our clients to determine their short- and long-term financial goals

and develop solutions to help achieve them. This means

focusing on the details, making wise decisions and getting it

right the first time — because their success is our success.

Bradford Lewis of Super Holdings, LLC (second from left), meets with (left to right) Tom Allen, Tom Proctor, Jr. and Collins Proctor from Red Brick Partners on the future site of The Alliance Center in downtown Tallahassee.

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Capital City Bank Group | 2007 Annual Report | Page 2/3

Is influential. Capital City Bank associates stand apart because of the enthusiasm, creativity and innovative ideas they bring to their work every day. Their devotion to a common goal of success for our clients, partners and Company is evident in every exchange of ideas, every interaction with clients and every act of service to their communities.

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Charles Davis is known for his quick-thinking, solutions-driven approach to client service. He is just one of the more than 1,100 associates who positively influence the operations of Capital City Bank.

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Charles Davis

Charles has been a member of the Capital City team for more

than 20 years. This year, his dedication, integrity, honesty and

compassion were recognized with the Godfrey Smith Award.

Charles’ loyalty and commitment to his clients, colleagues and

community represent the spirit of every Capital City Bank associate.

Glenda Thornton

As a Leon County Community Board Member, Glenda was eager to increase her support of Capital City Bank by purchasing stock when the Company went public more than a decade ago.

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Is integral to our business. Participation by our shareowners not only supports the vision and mission of Capital City Bank, but is essential to the longevity of our Company and its strength as we grow over time.

Our shareowners have many faces — they are our clients, our board members, our business partners, our associates and even our competitors — but every one is critical to our success because they offer more than financial support and guidance; they are members of the Capital City team.


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Capital City Bank leaders and community partners understand

how important our efforts are to the growth of the communities we serve. Every community deserves the chance to make the most of

its location, natural resources and economic potential.

Left to Right: Executive Vice President Bill Colledge and Johanna White inspect the future 10-acre site of Port St. Joe Port Authority operations with Allen Cox, Chairman of the Board of the Port Authority, and Tommy Pitts, Executive Director of the Port Authority — both members of our Gulf County Community Board.


Johanna White

As Gulf County president, Johanna and her community board were instrumental in

securing a $7 million loan for the Port St. Joe Port Authority to

purchase land for developing one of only 14 deepwater

ports in Florida.

Millie Smith

Millie’s personal banker was Julian V. Smith, former president of Industrial Bank before con-solidating into Capital City Bank. Whenever Millie called on him, Julian provided special attention that helped her endure any personal or financial diffi-culty she faced. Because of Julian’s attentions, he became more than Millie’s banker. He became her friend.

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Every time Capital City Bank associates interact with even one of our more than 250,000 clients, we have an opportunity to make an impression that will last a lifetime. Whether in person, over the phone or through online banking, our clients have come to expect focused, individual attention to meet their specific needs. Years ago, Millie Smith forged a relationship with an associate that left an indelible mark on her life — and her financial future. Her story is like so many others who have come to call Capital City Bank their bank for life.

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Everyone Counts at CCBG

Our relationships with clients, business partners and associates are the inspiration for every-thing we do and for striving to do business better than anyone else. We measure success by the strength of our greatest asset — personal relationships with the people who make up the Capital City family. And in this family, everyone counts.

William G. Smith, Jr.Chairman, President and Chief Executive Officer

“Capital City is well capitalized, which gives us both the strength and flexibility to take advantage of those opportunities that naturally arise in a difficult environment.”

Capital City had another solid year, despite a very challenging operating environment in 2007. Earnings for the year totaled $29.7 million or $1.66 per diluted share, as compared to $33.3 million or $1.79 per diluted share in 2006. The results produced a return on assets of 1.18% and return on equity of 9.68%. We continued focusing on our clients and meeting their needs during these challenging times, and as a result we are now in a position of strength which will serve us well in 2008 and enable us to capitalize on the growth and opportunities in our markets in Florida, Georgia, and Alabama.

I believe our associates set us apart from the competition and we continue to invest in them, and in turn, our future. We focused our internal efforts on reshaping our organization with a renewed focus on sales and service.

Due to a declining economy, in part driven by a slowdown in housing and real estate markets, 2007 financial results were down, compared to 2006. Though our performance is a reflection of the industry as a whole, Capital City had a number of milestone events during 2007.

While many banks in our industry are scrambling to raise capital, we repurchased a total of 1,404,364 shares of our stock, returning more than $43 million to our shareowners in addition to a dividend in excess of $12 million. Although we experienced margin compression in 2007, we were able to take advantage of our strong core deposit funding base and stratify rate structures to minimize the impact of the Federal Reserve’s three rate reductions (100 basis points) during the year.

Our low-cost core funding base, driven in part by our strategy and incredible service and sales efforts, continued to afford Capital City an enviable competitive advantage with regard to the management of our net interest margin, which was 5.10% for 2007. Our loan loss provision for the year of $6.2 million was higher than in 2006 and mirrors the overall decline in real estate markets we serve. We believe credit quality throughout our portfolio is sound and there are no significant concentrations in any particular borrower segment. Credit quality remains our number one strategic objective, and continued risk assessment is of utmost importance as we move into 2008.

Noninterest income, which grew 6.7% in 2007, represents more than 34% of our operating revenue and compares very favorably with our peer group at 21%. We constantly look for ways to enhance and diversify our revenue sources and continue to make significant strides in this area.

One of the most encouraging highlights of 2007 was the improvement in managing our operating expenses. Efforts to better control operating expenses that began in 2006 paid dividends in 2007, as evidenced by a meager .35% increase in noninterest expense over 2006.

As I write this letter, the daily reports on the economy are pretty discouraging. From where I sit, I am more encouraged. The markets Capital City serves are not immune to economic slowdowns, but have been and are weathering the storm better than what I hear on the nightly news or read in the daily newspaper. The major economic engines driving the majority of Capital City markets are education, healthcare and government. These engines continue to provide eco-nomic diversity and stability. While the upturn in the economy is likely to be jagged as the economy improves, I believe the sun will shine in 2009. Capital City is well capitalized, which gives us both the strength and flexibility to take advan-tage of those opportunities that naturally arise in a difficult environment. We remain committed to our clients, associates, shareowners, communities and the future of Capital City.

As always, I welcome your comments and questions.

Capital City Bank—more than your bank, your banker.


to Our Shareowners:


Percent(Dollars in Thousands, Except Per Share Data) 2007 2006 Change

For the Year: Net Income $ 29,683 $ 33,265 (10.8)% Cash Dividends Declared 12,823 12,322 4.1 Average Loans, Net of Unearned Interest 1,934,850 2,029,397 (4.7) Average Earning Assets 2,183,528 2,258,277 (3.3) Average Assets 2,507,217 2,581,078 (2.9) Average Deposits 1,990,446 2,034,931 (2.2) Average Equity 306,617 317,336 (3.4)

Basic Average Common Shares Outstanding 17,909,396 18,584,519 (3.6) Diluted Average Common Shares Outstanding 17,911,587 18,609,839 (3.8)

Per Share: Basic Net Income $ 1.66 $ 1.79 (7.3) Diluted Net Income 1.66 1.79 (7.3) Cash Dividends Declared 0.710 0.663 7.2 Diluted Book Value 17.03 17.01 0.1

Ratios: Return on Average Assets 1.18% 1.29% Return on Average Equity 9.68 10.48 Equity to Assets, Year-End 11.19 12.15 Dividend Payout 42.77 37.01 Net Interest Margin(1) 5.25 5.35

(1) Taxable-Equivalent Net Interest Income Divided by Average Earning Assets

Highlights


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$29.7

$33.3

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Net Income(in millions)

’07’06’05’04’03’02

$1.66$1.79

$1.66$1.74

$1.52$1.39

Diluted Earnings per Share

’07’06’05’04’03’02

1.18

1.291.22

1.461.40

1.34

Return on Assets(in percent)

’07’06’05’04’03’02

9.6810.4810.56

13.3112.8212.85

Return on Equity(in percent)

CCBGCorporate

HeadquartersTallahassee

• Jacksonville

• Tifton

• Montgomery

• Atlanta

• Panama City

• Tampa

• Orlando

West Point

Macon

East Dublin

Port St. Joe

Cross City

High Springs

Cedar Key

Inglis

Crystal River

Spring Hill

Port Richey

Crawfordville

Quincy

CairoWhigham

Dublin

Waynesboro

Havana Monticello

Thomasville

Madison

PerryBranford

Alachua

Palatka

Hastings

Fanning Springs

Williston

Citrus Springs

InvernessFloral City

Chiefland

StarkeKeystone Heights

Chattahoochee

Valley

Chipley

Newberry Gainesville

Bronson

JonesvilleBell

Trenton

• Mobile

F L O R I D A

G E O R G I AA L A B A M A

Capital Cit y Bank

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$2.6$2.5

$2.0

$1.8$1.7

$2.5$2.0$2.0

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$1.4$1.4

Visionary leadership is essential for any team to be influential in its industry and its community. At Capital City Bank, we have 15 outstanding senior managers whose personal relationships with clients, shareowners, business partners, government and civic leaders, and associates help guide every decision and make them effective leaders. Our executives also lead by example through their exemplary work ethic, commitment to excellence in their roles within the Company and extensive civic engagement in the communities we serve.

Capital Cit y Bank Group


Management Team: Front Row, Left to Right: Dale Thompson, Credit Administration; Flecia Braswell, Chief Brand Officer; Kim Davis, Chief Financial Officer; Randy Briley, Corporate & Professional Banking; Karen Love, Residential Mortgage Lending; Beth Corum, Chief People Officer; Back Row, Left to Right: Bill Moor, Capital City Banc Investments; Tom Barron, President, Capital City Bank; Randy Pople, Capital City Trust Company; Cindy Pyburn, Capital City Services Company; Mitch Englert, Community Banking; Ed Canup, Commercial Real Estate; Bill Smith, Chairman, President and Chief Executive Officer; Bill Colledge, MetroCommunity Banking; Eddie West, Sales Leadership

Left to Right: Frederick Carroll, III, Managing Partner, Carroll and Company, CPAs; John K. Humphress, Partner, Wadsworth, Humphress, Hollar & Konrad, PA; Cader B. Cox, III, CEO, Riverview Plantation, Inc.; Lina S. Knox, Community Volunteer; McGrath Keen, Jr., Private Investor; Thomas A. Barron, President, Capital City Bank; Ruth Knox, Attorney/President, Wesleyan College; William G. Smith, Jr., Chairman, President and Chief Executive Officer, Capital City Bank Group, Inc.; DuBose Ausley, Attorney, Ausley & McMullen, PA; J. Everitt Drew, President, SouthGroup Equities, Inc.; Dr. Henry L. Lewis, III, Dean, Florida A&M University College of Pharmacy

Page 20 | Capital City Bank Group | 2007 Annual Report

Board of

Form 10-K

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549 ____________________

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2007

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

(Exact name of Registrant as specified in its charter)

Florida 0-13358 59-2273542 (State of Incorporation) (Commission File Number) (IRS Employer Identification No.)

217 North Monroe Street, Tallahassee, Florida 32301 (Address of principal executive offices) (Zip Code)

(850) 402-7000 (Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class Name of Each Exchange on Which Registered Common Stock, $0.01 par value The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [ X ]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes [ ] No [ X ]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ] Accelerated filer [ X ] Non-accelerated filer [ ] Smaller reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ]

The aggregate market value of the registrant’s common stock, $0.01 par value per share, held by non-affiliates of the registrant on June 30, 2007, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $320,596,761 (based on the closing sales price of the registrant’s common stock on that date). Shares of the registrant’s common stock held by each officer and director and each person known to the registrant to own 10% or more of the outstanding voting power of the registrant have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not a determination for other purposes.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class Outstanding at February 29, 2008 Common Stock, $0.01 par value per share 17,169,096 shares

DOCUMENTS INCORPORATED BY REFERENCE

Portions of our Proxy Statement for the Annual Meeting of Shareowners to be held on April 24, 2008, are incorporated by reference in Part III.

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CAPITAL CITY BANK GROUP, INC. ANNUAL REPORT FOR 2007 ON FORM 10-K

TABLE OF CONTENTS

PART I PAGE

Item 1. Business 4

Item 1A. Risk Factors 14

Item 1B. Unresolved Staff Comments 20

Item 2. Properties 20

Item 3. Legal Proceedings 20

Item 4. Submission of Matters to a Vote of Security Holders 20

PART II

Item 5.

Market for the Registrant’s Common Equity, Related Shareowner Matters, and Issuer Purchases of

Equity Securities

20

Item 6. Selected Financial Data 22

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 23

Item 7A. Quantitative and Qualitative Disclosure About Market Risk 50

Item 8. Financial Statements and Supplementary Data 52

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 89

Item 9A. Controls and Procedures 89

Item 9B. Other Information 91

PART III

Item 10. Directors, Executive Officers, and Corporate Governance 91

Item 11. Executive Compensation 91

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareowner Matters 91

Item 13. Certain Relationships and Related Transactions, and Director Independence 92

Item 14. Principal Accountant Fees and Services 92

PART IV

Item 15. Exhibits and Financial Statement Schedules 93

Signatures 95

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INTRODUCTORY NOTE

This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among others, statements about our beliefs, plans, objectives, goals, expectations, estimates and intentions that are subject to significant risks and uncertainties and are subject to change based on various factors, many of which are beyond our control. The words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “target,” “goal,” and similar expressions are intended to identify forward-looking statements. All forward-looking statements, by their nature, are subject to risks and uncertainties. Our actual future results may differ materially from those set forth in our forward-looking statements. In addition to those risks discussed in this Annual Report under Item 1A Risk Factors, factors that could cause our actual results to differ materially from those in the forward-looking statements, include, without limitation:

the frequency and magnitude of foreclosure of our loans; the effects of our lack of a diversified loan portfolio, including the risks of geographic and industry concentrations; the accuracy of our financial statement estimates and assumptions, including the estimate for our loan loss provision; our ability to integrate the business and operations of companies and banks that we have acquired, and those we may

acquire in the future; our need and our ability to incur additional debt or equity financing; the strength of the United States economy in general and the strength of the local economies in which we conduct

operations; the effects of harsh weather conditions, including hurricanes; inflation, interest rate, market and monetary fluctuations; effect of changes in the stock market and other capital markets; legislative or regulatory changes; our ability to comply with the extensive laws and regulations to which we are subject; the willingness of clients to accept third-party products and services rather than our products and services and vice versa; changes in the securities and real estate markets; increased competition and its effect on pricing; technological changes; changes in monetary and fiscal policies of the U.S. Government; the effects of security breaches and computer viruses that may affect our computer systems; changes in consumer spending and saving habits; growth and profitability of our noninterest income; changes in accounting principles, policies, practices or guidelines; the limited trading activity of our common stock; the concentration of ownership of our common stock; anti-takeover provisions under federal and state law as well as our Articles of Incorporation and our Bylaws; other risks described from time to time in our filings with the Securities and Exchange Commission; and our ability to manage the risks involved in the foregoing.

However, other factors besides those listed in Item 1A Risk Factors or discussed in this Annual Report also could adversely affect our results, and you should not consider any such list of factors to be a complete set of all potential risks or uncertainties. Any forward-looking statements made by us or on our behalf speak only as of the date they are made. We do not undertake to update any forward-looking statement, except as required by applicable law.

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PART I Item 1. Business General Capital City Bank Group, Inc. (“CCBG”) is a financial holding company registered under the Gramm-Leach-Bliley Act of 1999 (“Gramm-Leach-Bliley Act”). CCBG was incorporated under Florida law on December 13, 1982, to acquire five national banks and one state bank that all subsequently became part of CCBG’s bank subsidiary, Capital City Bank (“CCB” or the “Bank”). In this report, the terms “Company”, “we”, “us”, or “our” mean CCBG and all subsidiaries included in our consolidated financial statements. We provide traditional deposit and credit services, asset management, trust, mortgage banking, merchant services, bank cards, data processing, and securities brokerage services through 70 full-service banking locations in Florida, Georgia, and Alabama. CCB operates these banking locations. At December 31, 2007, we had total consolidated assets of approximately $2.6 billion, total deposits of approximately $2.1 billion and shareowners’ equity was approximately $292.7 million. Our financial condition and results of operations are more fully discussed in our consolidated financial statements. CCBG’s principal asset is the capital stock of the Bank. CCB accounted for approximately 100% of consolidated assets at December 31, 2007, and approximately 100% of consolidated net income for the year ended December 31, 2007. In addition to our banking subsidiary, we have seven indirect subsidiaries, Capital City Trust Company, Capital City Mortgage Company (inactive), Capital City Banc Investments, Inc., Capital City Services Company, First Insurance Agency of Grady County, Inc., Southern Oaks, Inc., and FNB Financial Services, Inc., all of which are wholly-owned subsidiaries of CCB, and two direct subsidiaries CCBG Capital Trust I and CCBG Capital Trust II, both wholly-owned subsidiaries of CCBG. Dividends and management fees received from the Bank are our only source of income. Dividend payments by the Bank to us depend on the capitalization, earnings and projected growth of the Bank, and are limited by various regulatory restrictions. See the section entitled “Regulatory Considerations” in this Item 1 and Note 15 in the Notes to Consolidated Financial Statements for additional information. We had a total of 1,097 (full-time equivalent) associates at February 29, 2008. Page 22 contains other financial and statistical information about us. We have one reportable segment with the following principal services: Banking Services, Data Processing Services, Trust and Asset Management Services, and Brokerage Services. Banking Services CCB is a Florida chartered full-service bank engaged in the commercial and retail banking business. Significant services offered by the Bank include:

Business Banking – The Bank provides banking services to corporations and other business clients. Credit products are available for a wide variety of general business purposes, including financing for commercial business properties, equipment, inventories and accounts receivable, as well as commercial leasing and letters of credit. Treasury management services and merchant credit card transaction processing services are also offered.

Commercial Real Estate Lending – The Bank provides a wide range of products to meet the financing needs of commercial

developers and investors, residential builders and developers, and community development.

Residential Real Estate Lending – The Bank provides products to help meet the home financing needs of consumers, including conventional permanent and construction/permanent (fixed or adjustable rate) financing arrangements, and FHA/VA loan products. The bank offers both fixed-rate and adjustable rate residential mortgage (ARM) loans. As of December 31, 2007, approximately 16% of the Bank’s loan portfolio consisted of residential ARM loans. A portion of our loans originated are sold into the secondary market.

The Bank offers these products through its existing network of branch offices. Geographical expansion of the delivery of this product line has occurred over the past three years through the opening of mortgage lending offices in Gainesville, Florida (Alachua County) and Thomasville, Georgia (Thomas County).

Retail Credit – The Bank provides a full range of loan products to meet the needs of consumers, including personal loans,

automobile loans, boat/RV loans, home equity loans, and credit card programs.

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Institutional Banking – The Bank provides banking services to meet the needs of state and local governments, public

schools and colleges, charities, membership and not-for-profit associations including customized checking and savings accounts, cash management systems, tax-exempt loans, lines of credit, and term loans.

Retail Banking - The Bank provides a full range of consumer banking services, including checking accounts, savings

programs, automated teller machines (ATMs), debit/credit cards, night deposit services, safe deposit facilities, and PC/Internet banking. Clients can use the Capital City Bank Direct automated phone system to gain 24-hour access to their deposit and loan account information, and transfer funds between linked accounts. The Bank is a member of the “Star” ATM Network that permits banking clients to access cash at ATMs or point of sale merchants.

Data Processing Services Capital City Services Company (the “Services Company”) provides data processing services to financial institutions (including CCB), government agencies and commercial clients located throughout North Florida and South Georgia. As of February 29, 2008, the Services Company is providing computer services to eight correspondent banks, which have relationships with CCB. Trust Services and Asset Management Capital City Trust Company (the “Trust Company”) is the investment management arm of CCB. The Trust Company provides asset management for individuals through agency, personal trust, IRAs and personal investment management accounts. Administration of pension, profit sharing and 401(k) plans is a significant product line. Associations, endowments and other non-profit entities hire the Trust Company to manage their investment portfolios. A staff of well-trained professionals serves individuals requiring the services of a trustee, personal representative or a guardian. The market value of trust assets under discretionary management exceeded $781.0 million as of December 31, 2007, with total assets under administration exceeding $854.0 million. Brokerage Services We offer access to retail investment products through Capital City Banc Investments, Inc., a wholly-owned subsidiary of CCB. These products are offered through INVEST Financial Corporation, a member of FINRA and SIPC. Non-deposit investment and insurance products are: (1) not FDIC insured; (2) not deposits, obligations, or guaranteed by any bank; and (3) subject to investment risk, including the possible loss of principal amount invested. Capital City Banc Investments, Inc. offers a full line of retail securities products, including U.S. Government bonds, tax-free municipal bonds, stocks, mutual funds, unit investment trusts, annuities, life insurance and long-term health care. We are not an affiliate of INVEST Financial Corporation. Expansion of Business Since 1984, we have completed 15 acquisitions totaling approximately $1.6 billion in deposits within existing and new markets. In addition, since 2003, we have opened 10 new offices to improve service and product delivery within our markets. Plans are currently being developed for two new office openings in 2008, including one on Macon, Georgia and one in Palatka, Florida (replacement office). We plan to continue our expansion, emphasizing a combination of growth in existing markets and acquisitions. The restructuring in late 2007 of our community banking sales and service model will result in the more tactical focus on certain higher growth metro markets, including Macon, Tallahassee, Gainesville, and Hernando/Pasco. Acquisitions will be focused on a three state area including Florida, Georgia, and Alabama with a particular focus on acquiring banks and banking offices, which are $100 million to $400 million in asset size, located on the outskirts of major metropolitan areas. We will evaluate de novo expansion opportunities in attractive new markets in the event that acquisition opportunities are not feasible. Other expansion opportunities that will be evaluated include asset management and mortgage banking.

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Competition The banking business is rapidly changing. We operate in a highly competitive environment, especially with respect to services and pricing. The on-going consolidation of the banking industry has altered and continues to significantly alter the competitive environment within the Florida, Georgia, and Alabama markets. We believe this consolidation further enhances our competitive position and opportunities in many of our markets. Our primary market area is 20 counties in Florida, five counties in Georgia and one county in Alabama. In these markets, the Bank competes against a wide range of banking and nonbanking institutions including savings and loan associations, credit unions, money market funds, mutual fund advisory companies, mortgage banking companies, investment banking companies, finance companies and other types of financial institutions. All of Florida’s major banking concerns have a presence in Leon County. CCB’s Leon County deposits totaled $738.3 million, or 34.5%, of our consolidated deposits at December 31, 2007. The following table depicts our market share percentage within each respective county, based on total commercial bank deposits within the county.

Market Share as of June 30,(1) 2007 2006 2005 Florida

Alachua County(2) 4.7% 5.6% 6.3% Bradford County 47.6% 44.6% 42.6% Citrus County 3.0% 3.3% 3.5% Clay County 2.0% 2.0% 2.2% Dixie County 22.9% 20.8% 17.3% Gadsden County 61.0% 64.9% 68.0% Gilchrist County 33.6% 47.1% 49.5% Gulf County 11.7% 14.3% 19.8% Hernando County 1.2% 1.5% 1.4% Jefferson County 22.8% 24.6% 24.4% Leon County 16.2% 18.0% 17.5% Levy County 33.0% 34.4% 33.8% Madison County 13.1% 14.9% 15.1% Pasco County 0.2% 0.2% 0.3% Putnam County 11.1% 12.3% 12.3% St. Johns County(2) 1.2% 1.5 % 2.0 %Suwannee County 7.7% 11.8% 7.5% Taylor County 30.1% 28.6% 27.9% Wakulla County(3) 2.6% 2.9% -- Washington County 13.8% 17.4% 20.3%

Georgia(4) Bibb County 2.5% 2.9% 2.8% Burke County 7.8% 9.2% 9.3% Grady County 18.7% 20.0% 19.7% Laurens County 19.2% 23.8% 33.1% Troup County 6.2% 8.2% 7.5%

Alabama Chambers County 6.5% 4.7% 3.9%

(1) Obtained from the June 30, 2007 FDIC/OTS Summary of Deposits Report. (2) CCB entered market in May 2005. (3) CCB entered market in December 2005. (4) Does not include Thomas County where Capital City Bank maintains a residential mortgage lending office only.

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The following table sets forth the number of commercial banks and offices, including our offices and our competitors' offices, within each of the respective counties.

County Number of

Commercial Banks Number of Commercial

Bank Offices Florida

Alachua 13 65 Bradford 3 3 Citrus 16 49 Clay 12 29 Dixie 3 4 Gadsden 4 6 Gilchrist 3 6 Gulf 6 9 Hernando 13 41 Jefferson 2 2 Leon 14 83 Levy 3 13 Madison 6 6 Pasco 25 114 Putnam 6 16 St. Johns 22 63 Suwannee 5 8 Taylor 3 4 Wakulla 4 9 Washington 5 5

Georgia Bibb 11 55 Burke 5 10 Grady 5 8 Laurens 10 19 Troup 10 24

Alabama Chambers 5 10

Data obtained from the June 30, 2007 FDIC/OTS Summary of Deposits Report. Seasonality We believe our commercial banking operations are not generally seasonal in nature. Public deposits tend to increase with tax collections in the second and fourth quarters and decline with spending thereafter.

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REGULATORY CONSIDERATIONS We must comply with state and federal banking laws and regulations that control virtually all aspects of our operations. These laws and regulations generally aim to protect our depositors, not our shareowners or our creditors. Any changes in applicable laws or regulations may materially affect our business and prospects. Such legislative or regulatory changes may also affect our operations. The following description summarizes some of the laws and regulations to which we are subject. References to applicable statutes and regulations are brief summaries, do not purport to be complete, and are qualified in their entirety by reference to such statutes and regulations. The Company CCBG is registered with the Board of Governors of the Federal Reserve System (the “Federal Reserve”) as a financial holding company under the Gramm-Leach-Bliley Act and is registered with the Federal Reserve as a bank holding company under the Bank Holding Company Act of 1956. As a result, we are subject to supervisory regulation and examination by the Federal Reserve. The Gramm-Leach-Bliley Act, the Bank Holding Company Act, and other federal laws subject financial holding companies to particular restrictions on the types of activities in which they may engage, and to a range of supervisory requirements and activities, including regulatory enforcement actions for violations of laws and regulations. Permitted Activities. The Gramm-Leach-Bliley Act, enacted on November 12, 1999, amended the Bank Holding Company Act by (i) allowing bank holding companies that qualify as “financial holding companies” to engage in a broad range of financial and related activities; (ii) allowing insurers and other financial service companies to acquire banks; (iii) removing restrictions that applied to bank holding company ownership of securities firms and mutual fund advisory companies; and (iv) establishing the overall regulatory scheme applicable to bank holding companies that also engage in insurance and securities operations. The general effect of the law was to establish a comprehensive framework to permit affiliations among commercial banks, insurance companies, securities firms, and other financial service providers. Activities that are financial in nature are broadly defined to include not only banking, insurance, and securities activities, but also merchant banking and additional activities that the Federal Reserve, in consultation with the Secretary of the Treasury, determines to be financial in nature, incidental to such financial activities, or complementary activities that do not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally. In contrast to financial holding companies, bank holding companies are limited to managing or controlling banks, furnishing services to or performing services for its subsidiaries, and engaging in other activities that the Federal Reserve determines by regulation or order to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. Except for the activities relating to financial holding companies permissible under the Gramm-Leach-Bliley Act, these restrictions will apply to us. In determining whether a particular activity is permissible, the Federal Reserve must consider whether the performance of such an activity reasonably can be expected to produce benefits to the public that outweigh possible adverse effects. Possible benefits include greater convenience, increased competition, and gains in efficiency. Possible adverse effects include undue concentration of resources, decreased or unfair competition, conflicts of interest, and unsound banking practices. Despite prior approval, the Federal Reserve may order a bank holding company or its subsidiaries to terminate any activity or to terminate ownership or control of any subsidiary when the Federal Reserve has reasonable cause to believe that a serious risk to the financial safety, soundness or stability of any bank subsidiary of that bank holding company may result from such an activity. Changes in Control. Subject to certain exceptions, the Bank Holding Company Act and the Change in Bank Control Act, together with the applicable regulations, require Federal Reserve approval (or, depending on the circumstances, no notice of disapproval) prior to any person or company acquiring “control” of a bank or bank holding company. A conclusive presumption of control exists if an individual or company acquires the power, directly or indirectly, to direct the management or policies of an insured depository institution or to vote 25% or more of any class of voting securities of any insured depository institution. A rebuttable presumption of control exists if a person or company acquires 10% or more but less than 25% of any class of voting securities of an insured depository institution and either the institution has registered securities under Section 12 of the Securities Exchange Act of 1934 or as we will refer to as the Exchange Act, or no other person will own a greater percentage of that class of voting securities immediately after the acquisition. As a bank holding company, we are required to obtain prior approval from the Federal Reserve before (i) acquiring all or substantially all of the assets of a bank or bank holding company, (ii) acquiring direct or indirect ownership or control of more than 5% of the outstanding voting stock of any bank or bank holding company (unless we own a majority of such bank’s voting shares), or (iii) merging or consolidating with any other bank or bank holding company. In determining whether to approve a proposed bank acquisition, federal bank regulators will consider, among other factors, the effect of the acquisition on competition, the public benefits expected to be received from the acquisition, the projected capital ratios and levels on a post-acquisition basis, and the acquiring institution’s record of addressing the credit needs of the communities it serves, including the needs of low and moderate income neighborhoods, consistent with the safe and sound operation of the bank, under the Community Reinvestment Act of 1977.

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Under Florida law, a person or entity proposing to directly or indirectly acquire control of a Florida bank must first obtain permission from the Florida Office of Financial Regulation. Florida statutes define “control” as either (a) indirectly or directly owning, controlling or having power to vote 25% or more of the voting securities of a bank; (b) controlling the election of a majority of directors of a bank; (c) owning, controlling, or having power to vote 10% or more of the voting securities as well as directly or indirectly exercising a controlling influence over management or policies of a bank; or (d) as determined by the Florida Office of Financial Regulation. These requirements will affect us because the Bank is chartered under Florida law and changes in control of us are indirect changes in control of the Bank. Tying. Bank holding companies and their affiliates are prohibited from tying the provision of certain services, such as extending credit, to other services or products offered by the holding company or its affiliates, such as deposit products. Capital; Dividends; Source of Strength. The Federal Reserve imposes certain capital requirements on bank holding companies under the Bank Holding Company Act, including a minimum leverage ratio and a minimum ratio of “qualifying” capital to risk-weighted assets. These requirements are described below under “Capital Regulations.” Subject to its capital requirements and certain other restrictions, we are able to borrow money to make a capital contribution to the Bank, and such loans may be repaid from dividends paid from the Bank to us. The ability of the Bank to pay dividends, however, will be subject to regulatory restrictions that are described below under “Dividends.” We are also able to raise capital for contributions to the Bank by issuing securities without having to receive regulatory approval, subject to compliance with federal and state securities laws. In accordance with Federal Reserve policy, we are expected to act as a source of financial strength to the Bank and to commit resources to support the Bank in circumstances in which we might not otherwise do so. In furtherance of this policy, the Federal Reserve may require a financial holding company to terminate any activity or relinquish control of a nonbank subsidiary (other than a nonbank subsidiary of a bank) upon the Federal Reserve’s determination that such activity or control constitutes a serious risk to the financial soundness or stability of any subsidiary depository institution of the bank holding company. Further, federal bank regulatory authorities have additional discretion to require a financial holding company to divest itself of any bank or nonbank subsidiary if the agency determines that divestiture may aid the depository institution’s financial condition. Capital City Bank CCB is a banking institution that is chartered by and headquartered in the State of Florida, and it is subject to supervision and regulation by the Florida Office of Financial Regulation. The Florida Office of Financial Regulation supervises and regulates all areas of the Bank’s operations including, without limitation, the making of loans, the issuance of securities, the conduct of the Bank’s corporate affairs, the satisfaction of capital adequacy requirements, the payment of dividends, and the establishment or closing of branches. The Bank is also a member bank of the Federal Reserve System, which makes the Bank’s operations subject to broad federal regulation and oversight by the Federal Reserve. In addition, the Bank’s deposit accounts are insured by the Federal Deposit Insurance Corporation (“FDIC”) to the maximum extent permitted by law, and the FDIC has certain enforcement powers over the Bank. As a state chartered banking institution in the State of Florida, the Bank is empowered by statute, subject to the limitations contained in those statutes, to take and pay interest on savings and time deposits, to accept demand deposits, to make loans on residential and other real estate, to make consumer and commercial loans, to invest, with certain limitations, in equity securities and in debt obligations of banks and corporations and to provide various other banking services on behalf of the Bank’s clients. Various consumer laws and regulations also affect the operations of the Bank, including state usury laws, laws relating to fiduciaries, consumer credit and equal credit opportunity laws, and fair credit reporting. In addition, the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) prohibits insured state chartered institutions from conducting activities as principal that are not permitted for national banks. A bank, however, may engage in an otherwise prohibited activity if it meets its minimum capital requirements and the FDIC determines that the activity does not present a significant risk to the deposit insurance fund. Reserves. The Federal Reserve requires all depository institutions to maintain reserves against some transaction accounts (primarily NOW and Super NOW checking accounts). The balances maintained to meet the reserve requirements imposed by the Federal Reserve may be used to satisfy liquidity requirements. An institution may borrow from the Federal Reserve Bank “discount window” as a secondary source of funds, provided that the institution meets the Federal Reserve Bank’s credit standards. Dividends. The Bank is subject to legal limitations on the frequency and amount of dividends that can be paid to us. The Federal Reserve may restrict the ability of the Bank to pay dividends if such payments would constitute an unsafe or unsound banking practice. These regulations and restrictions may limit our ability to obtain funds from the Bank for our cash needs, including funds for acquisitions and the payment of dividends, interest, and operating expenses.

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In addition, Florida law also places certain restrictions on the declaration of dividends from state chartered banks to their holding companies. Pursuant to Section 658.37 of the Florida Banking Code, the board of directors of state chartered banks, after charging off bad debts, depreciation and other worthless assets, if any, and making provisions for reasonably anticipated future losses on loans and other assets, may quarterly, semi-annually or annually declare a dividend of up to the aggregate net profits of that period combined with the bank’s retained net profits for the preceding two years and, with the approval of the Florida Office of Financial Regulation, declare a dividend from retained net profits which accrued prior to the preceding two years. Before declaring such dividends, 20% of the net profits for the preceding period as is covered by the dividend must be transferred to the surplus fund of the bank until this fund becomes equal to the amount of the bank’s common stock then issued and outstanding. A state chartered bank may not declare any dividend if (i) its net income from the current year combined with the retained net income for the preceding two years is a loss or (ii) the payment of such dividend would cause the capital account of the bank to fall below the minimum amount required by law, regulation, order or any written agreement with the Florida Office of Financial Regulation or a federal regulatory agency. Insurance of Accounts and Other Assessments. The FDIC merged the Bank Insurance Fund and the Savings Association Insurance Fund to form the Deposit Insurance Fund on March 31, 2006. The deposit accounts of the Bank are currently insured by the Deposit Insurance Fund generally up to a maximum of $100,000 per separately insured depositor, except for retirement accounts, which are insured up to $250,000. The Bank pays its deposit insurance assessments to the Deposit Insurance Fund. Effective January 1, 2007, the FDIC established a risk-based assessment system for determining the deposit insurance assessments to be paid by insured depository institutions. Under the assessment system, the FDIC assigns an institution to one of four risk categories, with the first category having two sub-categories based on the institution’s most recent supervisory and capital evaluations, designed to measure risk. Assessment rates currently range from 0.05% of deposits for an institution in the highest sub-category of the highest category to 0.43% of deposits for an institution in the lowest category. The FDIC is authorized to raise the assessment rates as necessary to maintain the minimum required 1.25% reserve ratio of premiums held to deposits insured. The FDIC allows the use of credits for assessments previously paid. In addition, all FDIC insured institutions are required to pay assessments to the FDIC at an annual rate of approximately 0.0122% of insured deposits to fund interest payments on bonds issued by the Financing Corporation, an agency of the federal government established to recapitalize the predecessor to the Savings Association Insurance Fund. These assessments will continue until the Financing Corporation bonds mature in 2017 through 2019. Transactions With Affiliates. Pursuant to Sections 23A and 23B of the Federal Reserve Act and Regulation W, the authority of the Bank to engage in transactions with related parties or “affiliates” or to make loans to insiders is limited. Loan transactions with an “affiliate” generally must be collateralized and certain transactions between the Bank and its “affiliates”, including the sale of assets, the payment of money or the provision of services, must be on terms and conditions that are substantially the same, or at least as favorable to the Bank, as those prevailing for comparable nonaffiliated transactions. In addition, the Bank generally may not purchase securities issued or underwritten by affiliates. Loans to executive officers, directors or to any person who directly or indirectly, or acting through or in concert with one or more persons, owns, controls or has the power to vote more than 10% of any class of voting securities of a bank, which we refer to as 10% Shareholders, or to any political or campaign committee the funds or services of which will benefit such executive officers, directors, or 10% Shareholders or which is controlled by such executive officers, directors or 10% Shareholders, are subject to Sections 22(g) and 22(h) of the Federal Reserve Act and its corresponding regulations (Regulation O) and Section 13(k) of the Exchange Act relating to the prohibition on personal loans to executives which exempts financial institutions in compliance with the insider lending restrictions of Section 22(h) of the Federal Reserve Act. Among other things, these loans must be made on terms substantially the same as those prevailing on transactions made to unaffiliated individuals and certain extensions of credit to such persons must first be approved in advance by a disinterested majority of the entire board of directors. Section 22(h) of the Federal Reserve Act prohibits loans to any such individuals where the aggregate amount exceeds an amount equal to 15% of an institution’s unimpaired capital and surplus plus an additional 10% of unimpaired capital and surplus in the case of loans that are fully secured by readily marketable collateral, or when the aggregate amount on all such extensions of credit outstanding to all such persons would exceed the bank’s unimpaired capital and unimpaired surplus. Section 22(g) identifies limited circumstances in which the Bank is permitted to extend credit to executive officers. Community Reinvestment Act. The Community Reinvestment Act and its corresponding regulations are intended to encourage banks to help meet the credit needs of their service area, including low and moderate income neighborhoods, consistent with the safe and sound operations of the banks. These regulations provide for regulatory assessment of a bank’s record in meeting the needs of its service area. Federal banking agencies are required to make public a rating of a bank’s performance under the Community Reinvestment Act. The Federal Reserve considers a bank’s Community Reinvestment Act rating when the bank submits an application to establish branches, merge, or acquire the assets and assume the liabilities of another bank. In the case of a financial holding company, the Community Reinvestment Act performance record of all banks involved in the merger or acquisition are reviewed in connection with the filing of an application to acquire ownership or control of shares or assets of a bank or to merge with any other financial holding company. An unsatisfactory record can substantially delay or block the transaction. CCB received a satisfactory rating on its most recent Community Reinvestment Act assessment.

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Capital Regulations. The Federal Reserve has adopted risk-based, capital adequacy guidelines for financial holding companies and their subsidiary state-chartered banks that are members of the Federal Reserve System. The risk-based capital guidelines are designed to make regulatory capital requirements more sensitive to differences in risk profiles among banks and financial holding companies, to account for off-balance sheet exposure, to minimize disincentives for holding liquid assets and to achieve greater consistency in evaluating the capital adequacy of major banks throughout the world. Under these guidelines, assets and off-balance sheet items are assigned to broad risk categories each with designated weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance sheet items. The current guidelines require all financial holding companies and federally regulated banks to maintain a minimum risk-based total capital ratio equal to 8%, of which at least 4% must be Tier I Capital. Tier I Capital, which includes common stockholders’ equity, noncumulative perpetual preferred stock, and a limited amount of cumulative perpetual preferred stock and trust preferred securities, less certain goodwill items and other intangible assets, is required to equal at least 4% of risk-weighted assets. The remainder (“Tier II Capital”) may consist of (i) an allowance for loan losses of up to 1.25% of risk-weighted assets, (ii) excess of qualifying perpetual preferred stock, (iii) hybrid capital instruments, (iv) perpetual debt, (v) mandatory convertible securities, and (vi) subordinated debt and intermediate-term preferred stock up to 50% of Tier I Capital. Total capital is the sum of Tier I and Tier II Capital less reciprocal holdings of other banking organizations’ capital instruments, investments in unconsolidated subsidiaries and any other deductions as determined by the appropriate regulator (determined on a case by case basis or as a matter of policy after formal rule making). In computing total risk-weighted assets, bank and financial holding company assets are given risk-weights of 0%, 20%, 50% and 100%. In addition, certain off-balance sheet items are given similar credit conversion factors to convert them to asset equivalent amounts to which an appropriate risk-weight will apply. Most loans will be assigned to the 100% risk category, except for performing first mortgage loans fully secured by 1- to 4-family and certain multi-family residential property, which carry a 50% risk rating. Most investment securities (including, primarily, general obligation claims on states or other political subdivisions of the United States) will be assigned to the 20% category, except for municipal or state revenue bonds, which have a 50% risk-weight, and direct obligations of the U.S. Treasury or obligations backed by the full faith and credit of the U.S. Government, which have a 0% risk-weight. In covering off-balance sheet items, direct credit substitutes, including general guarantees and standby letters of credit backing financial obligations, are given a 100% conversion factor. Transaction-related contingencies such as bid bonds, standby letters of credit backing non-financial obligations, and undrawn commitments (including commercial credit lines with an initial maturity of more than one year) have a 50% conversion factor. Short-term commercial letters of credit are converted at 20% and certain short-term unconditionally cancelable commitments have a 0% factor. The federal bank regulatory authorities have also adopted regulations that supplement the risk-based guidelines. These regulations generally require banks and financial holding companies to maintain a minimum level of Tier I Capital to total assets less goodwill of 4% (the “leverage ratio”). The Federal Reserve permits a bank to maintain a minimum 3% leverage ratio if the bank achieves a 1 rating under the CAMELS rating system in its most recent examination, as long as the bank is not experiencing or anticipating significant growth. The CAMELS rating is a non-public system used by bank regulators to rate the strength and weaknesses of financial institutions. The CAMELS rating is comprised of six categories: capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk. Banking organizations experiencing or anticipating significant growth, as well as those organizations which do not satisfy the criteria described above, will be required to maintain a minimum leverage ratio ranging generally from 4% to 5%. The bank regulators also continue to consider a “tangible Tier I leverage ratio” in evaluating proposals for expansion or new activities. The tangible Tier I leverage ratio is the ratio of a banking organization’s Tier I Capital, less deductions for intangibles otherwise includable in Tier I Capital, to total tangible assets. Federal law and regulations establish a capital-based regulatory scheme designed to promote early intervention for troubled banks and require the FDIC to choose the least expensive resolution of bank failures. The capital-based regulatory framework contains five categories of compliance with regulatory capital requirements, including “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.” To qualify as a “well-capitalized” institution, a bank must have a leverage ratio of no less than 5%, a Tier I risk-based ratio of no less than 6%, and a total risk-based capital ratio of no less than 10%, and the bank must not be under any order or directive from the appropriate regulatory agency to meet and maintain a specific capital level. Generally, a financial institution must be “well capitalized” before the Federal Reserve will approve an application by a financial holding company to acquire or merge with a bank or bank holding company. Under the regulations, the applicable agency can treat an institution as if it were in the next lower category if the agency determines (after notice and an opportunity for hearing) that the institution is in an unsafe or unsound condition or is engaging in an unsafe or unsound practice. The degree of regulatory scrutiny of a financial institution will increase, and the permissible activities of the institution will decrease, as it moves downward through the capital categories. Institutions that fall into one of the three undercapitalized categories may be required to (i) submit a capital restoration plan; (ii) raise additional capital; (iii) restrict their growth, deposit interest rates, and other activities; (iv) improve their management; (v) eliminate management fees; or (vi) divest themselves of all or a part of their operations. Financial holding companies controlling financial institutions can be called upon to boost the institutions’ capital and to partially guarantee the institutions’ performance under their capital restoration plans.

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It should be noted that the minimum ratios referred to above are merely guidelines and the bank regulators possess the discretionary authority to require higher ratios. We currently exceed the requirements contained in the applicable regulations, policies and directives pertaining to capital adequacy, and are unaware of any material violation or alleged violation of these regulations, policies or directives. Anti-money Laundering. The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA PATRIOT Act”) was enacted in response to the terrorist attacks occurring on September 11, 2001. The USA PATRIOT ACT is intended to strengthen the U.S. law enforcement and intelligence communities’ ability to work together to combat terrorism. Title III of the USA PATRIOT Act, the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001, amended the Bank Secrecy Act and adopted additional provisions that increased the obligations of financial institutions, including the Bank, to identify their clients, watch for and report upon suspicious transactions, respond to requests for information by federal banking and law enforcement agencies, and share information with other financial institutions. In addition, the collected client identification information must be verified within a reasonable time after a new account is opened through documentary or non-documentary methods. All new clients must be screened against any Section 326 government lists of known or suspected terrorists within a reasonable time after opening an account. On July 19, 2007, the Federal Reserve and the other federal financial regulatory agencies issued an interagency policy on the application of section 8(s) of the Federal Deposit Insurance Act. This provision generally requires each federal banking agency to issue an order to cease and desist when a bank is in violation of the requirement to establish and maintain a Bank Secrecy Act/anti-money laundering (BSA/AML) compliance program. The policy statement provides that, in addition to the circumstances where the agencies will issue a cease and desist order in compliance with section 8(s), they may take other actions as appropriate for other types of BSA/AML program concerns or for violations of other BSA requirements. The policy statement also does not address the independent authority of the U.S. Department of the Treasury’s Financial Crimes Enforcement Network to take enforcement action for violations of the BSA. Securities Activities. On September 19, 2007, the SEC adopted Regulation R, which implements the bank broker-dealer exceptions enacted in the Gramm-Leach-Bliley Act. Regulation R affects the way the Bank’s employees who are not registered with the SEC may be compensated for referrals to a third-party broker-dealer for which the Bank has entered into a networking arrangement. In addition, Regulation R broadens the ability of the Bank to effect securities transactions in a trustee or fiduciary capacity without registering as a broker, permit banks to effect certain sweep account transactions, and to accept orders for securities transactions from employee plan accounts, individual retirement plan accounts, and other similar accounts. Banks are expected to comply on the first day of their fiscal year beginning on or after September 1, 2008. Privacy. Under the Gramm-Leach-Bliley Act, federal banking regulators adopted rules limiting the ability of banks and other financial institutions to disclose nonpublic information about consumers to nonaffiliated third parties. The rules require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to nonaffiliated third parties. Fair and Accurate Credit Transaction Act of 2003. The Fair and Accurate Credit Transaction Act of 2003, which amended the Fair Credit Reporting Act, enhances consumers’ ability to combat identity theft, increases the accuracy of consumer reports, allows consumers to exercise greater control over the type and amount of marketing solicitations they receive, restricts the use and disclosure of sensitive medical information, and establishes uniform national standards in the regulation of consumer reporting. On October 31, 2007, the Federal Reserve and the other federal financial regulatory agencies together with the U.S. Department of the Treasury and the Federal Trade Commission issued final regulations (Red Flag Regulations) enacting Sections 114 and 315 of the Fair and Accurate Credit Transaction Act of 2003. The Red Flag Regulations require the Bank to have identity theft policies and programs in place by no later than November 1, 2008. The Red Flag Regulations require the surviving bank subsidiary to develop and implement an identity theft protection program for combating identity theft in connection with new and existing consumer accounts and other accounts for which there is a reasonably foreseeable risk of identity theft. Consumer Laws and Regulations. The Bank is also subject to other federal and state consumer laws and regulations that are designed to protect consumers in transactions with banks. While the list set forth below is not exhaustive, these laws and regulations include the Truth in Lending Act, the Truth in Savings Act, the Electronic Funds Transfer Act, the Expedited Funds Availability Act, the Check Clearing for the 21st Century Act, the Fair Credit Reporting Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Home Mortgage Disclosure Act, and the Real Estate Settlement Procedures Act, among others. These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must deal with clients when taking deposits or making loans to such clients. The Bank must comply with the applicable provisions of these consumer protection laws and regulations as part of its ongoing client relations.

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Future Legislative Developments Various legislative acts are from time to time introduced in Congress and the Florida legislature. Such legislation may change banking statutes and the environment in which our banking subsidiary and we operate in substantial and unpredictable ways. We cannot determine the ultimate effect that potential legislation, if enacted, or implementing regulations with respect thereto, would have upon our financial condition or results of operations or that of our banking subsidiary. Effect of Governmental Monetary Policies The commercial banking business in which the Bank engages is affected not only by general economic conditions, but also by the monetary policies of the Federal Reserve. Changes in the discount rate on member bank borrowing, availability of borrowing at the “discount window,” open market operations, the imposition of changes in reserve requirements against member banks’ deposits and assets of foreign branches and the imposition of and changes in reserve requirements against certain borrowings by banks and their affiliates are some of the instruments of monetary policy available to the Federal Reserve. These monetary policies are used in varying combinations to influence overall growth and distributions of bank loans, investments and deposits, and this use may affect interest rates charged on loans or paid on deposits. The monetary policies of the Federal Reserve have had a significant effect on the operating results of commercial banks and are expected to do so in the future. The monetary policies of the Federal Reserve are influenced by various factors, including inflation, unemployment, and short-term and long-term changes in the international trade balance and in the fiscal policies of the U.S. Government. Future monetary policies and the effect of such policies on the future business and earnings of the Bank cannot be predicted. Income Taxes We are subject to income taxes at the federal level and subject to state taxation based on the laws of each state in which we operate. We file a consolidated federal tax return with a fiscal year ending on December 31. We have filed tax returns for each state jurisdiction affected in 2006 and will do the same for 2007. Website Access to Company's Reports Our Internet website is www.ccbg.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, including any amendments to those reports filed or furnished pursuant to section 13(a) or 15(d), and reports filed pursuant to Section 16, 13(d), and 13(g) of the Exchange Act are available free of charge through our website as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission. The information on our website is not incorporated by reference into this report.

http://www.ccbg.com

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Item 1A. Risk Factors You should consider carefully the following risk factors before deciding whether to invest in our common stock. Our business, including our operating results and financial condition, could be harmed by any of these risks. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment. In assessing these risks, you should also refer to the other information contained in our filings with the SEC, including our financial statements and related notes. Risks Related to Our Business The continuation of current market conditions could adversely impact our business. Over the past 12 months, a combination of rising interest rates and softening real estate prices throughout the United States, but particularly Florida, culminated in an industry-wide increase in borrowers unable to make their mortgage payments and increased foreclosure rates. Lenders in certain sections of the housing and mortgage markets were forced to close or limit their operations. In response, financial institutions have tightened their underwriting standards, limiting the availability of sources of credit and liquidity. These conditions have already impacted the demand for our products by clients and by secondary market participants. If these negative market conditions become more widespread or continue for a prolonged period our earnings and capital could be negatively impacted. An inadequate allowance for loan losses would reduce our earnings. We are exposed to the risk that our clients will be unable to repay their loans according to their terms and that any collateral securing the payment of their loans will not be sufficient to assure full repayment. This will result in credit losses that are inherent in the lending business. We evaluate the collectability of our loan portfolio and provide an allowance for loan losses that we believe is adequate based upon such factors as:

the risk characteristics of various classifications of loans; previous loan loss experience; specific loans that have loss potential; delinquency trends; estimated fair market value of the collateral; current economic conditions; and geographic and industry loan concentrations.

If our estimate of credit losses inherent in the loan portfolio is incorrect, our earnings could be significantly and adversely affected because our allowance may not be adequate. Additionally, we may experience losses in our loan portfolios or encounter adverse trends that require us to significantly increase our allowance for loan losses in the future, which could also have an adverse affect on our earnings. Our concentration in loans secured by real estate may increase our credit losses, which would negatively affect our financial results. Due to the lack of diversified industry within the markets served by the Bank and the relatively close proximity of our geographic markets, we have both geographic concentrations as well as concentrations in the types of loans funded. Specifically, due to the nature of our markets, a significant portion of the portfolio has historically been secured with real estate. As of December 31, 2007, approximately 33.1% and 35.5% of our $1.9 billion loan portfolio was secured by commercial real estate and residential real estate, respectively. As of this same date, approximately 7.4% was secured by property under construction. A major change in the real estate market, such as deterioration in the value of collateral, or in the local or national economy, could adversely affect our clients’ ability to repay their loans. In the event we are required to foreclose on a property securing one of our mortgage loans or otherwise pursue our remedies in order to protect our investment, we may be unable to recover funds in an amount equal to our projected return on our investment or in an amount sufficient to prevent a loss to us due to prevailing economic conditions, real estate values and other factors associated with the ownership of real property. As a result, the market value of the real estate or other collateral underlying our loans may not, at any given time, be sufficient to satisfy the outstanding principal amount of the loans, and consequently, we would sustain loan losses.

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Our loan portfolio includes loans with a higher risk of loss. We originate commercial real estate loans, commercial loans, construction loans, consumer loans, and residential mortgage loans primarily within our market area. Commercial real estate, commercial, construction, and consumer loans may expose a lender to greater credit risk than loans secured by single-family residential real estate because the collateral securing these loans may not be sold as easily as single-family residential real estate. In addition, commercial real estate, commercial and construction/development loans tend to involve larger loan balances to a single borrower or groups of related borrowers and are more susceptible to a risk of loss during a downturn in the business cycle. These loans also have greater credit risk than residential real estate for the following reasons:

Commercial Real Estate Loans. Repayment is dependent on income being generated in amounts sufficient to cover operating expenses and debt service. These loans also involve greater risk because they are generally not fully amortizing over a loan period, but rather have a balloon payment due at maturity. A borrower’s ability to make a balloon payment typically will depend on being able to either refinance the loan or timely sell the underlying property.

Commercial Loans. Repayment is generally dependent upon the successful operation of the borrower’s business. In

addition, the collateral securing the loans may depreciate over time, be difficult to appraise, be illiquid, or fluctuate in value based on the success of the business.

Construction Loans. The risk of loss is largely dependent on our initial estimate of whether the property’s value at

completion equals or exceeds the cost of property construction and the availability of take-out financing. During the construction phase, a number of factors can result in delays or cost overruns. If our estimate is inaccurate or if actual construction costs exceed estimates, the value of the property securing our loan may be insufficient to ensure full repayment when completed through a permanent loan or by seizure of collateral.

Consumer Loans. Consumer loans (such as personal lines of credit) are collateralized, if at all, with assets that may not

provide an adequate source of payment of the loan due to depreciation, damage, or loss. If our nonperforming loans continue to increase, our earnings will suffer. At December 31, 2007, our non-performing loans (which consist of non-accrual loans) totaled $25.1 million, or 1.31% of the total loan portfolio, which is an increase of $17.1 million, or 212% over non-performing loans at December 31, 2006. At December 31, 2007, our nonperforming assets (which include foreclosed real estate) were $28.2 million, or 1.08% of total assets. In addition, the Bank had approximately $28.2 million in accruing loans that were 30-89 days delinquent as of December 31, 2007. Our non-performing assets adversely affect our net income in various ways. We do not record interest income on non-accrual loans or real estate owned. In addition, if our estimate for the recorded allowance for loan losses proves to be incorrect and our allowance is inadequate, we will have to increase the allowance accordingly. In addition, the resolution of non-performing assets requires the active involvement of management, which can distract them from more profitable activity. We may incur losses if we are unable to successfully manage interest rate risk. Our profitability depends largely on the Bank’s net interest income, which is the difference between income on interest-earning assets such as loans and investment securities, and expense on interest-bearing liabilities such as deposits and our borrowings. We are unable to predict changes in market interest rates, which are affected by many factors beyond our control including inflation, recession, unemployment, money supply, domestic and international events and changes in the United States and other financial markets. Our net interest income may be reduced if: (i) more interest-earning assets than interest-bearing liabilities reprice or mature during a time when interest rates are declining or (ii) more interest-bearing liabilities than interest-earning assets reprice or mature during a time when interest rates are rising. Changes in the difference between short- and long-term interest rates may also harm our business. For example, short-term deposits may be used to fund longer-term loans. When differences between short-term and long-term interest rates shrink or disappear, the spread between rates paid on deposits and received on loans could narrow significantly, decreasing our net interest income. If market interest rates rise rapidly, interest rate adjustment caps may limit increases in the interest rates on adjustable rate loans, thus reducing our net interest income because we may need to pay the higher rates on our deposits and borrowings while being limited on the re-pricing of these loans due to the interest rate caps.

16

An economic downturn in Florida and Georgia could hinder our ability to operate profitably and have an adverse impact on our operations. Our interest-earning assets are heavily concentrated in mortgage loans secured by properties located in Florida and Georgia. As of December 31, 2007, substantially all of our loans secured by real estate are secured by properties located in Florida and Georgia. The concentration of our loans in these areas subjects us to risk that a downturn in the economy or recession in those areas could result in a decrease in loan originations and increases in delinquencies and foreclosures, which would more greatly affect us than if our lending were more geographically diversified. In addition, since a large portion of our portfolio is secured by properties located in Florida, the occurrence of a natural disaster, such as a hurricane, could result in a decline in loan originations, a decline in the value or destruction of mortgaged properties and an increase in the risk of delinquencies, foreclosures or loss on loans originated by us in that state. We may suffer losses if there is a decline in the value of the properties underlying our mortgage loans that would have an adverse impact on our operations. Since we engage in lending secured by real estate and may be forced to foreclose on the collateral property and own the underlying real estate, we may be subject to the increased costs associated with the ownership of real property, which could result in reduced net income. Since we originate loans secured by real estate, we may have to foreclose on the collateral property to protect our investment and may thereafter own and operate such property, in which case we are exposed to the risks inherent in the ownership of real estate. The amount that we, as a mortgagee, may realize after a default is dependent upon factors outside of our control, including, but not limited to:

general or local economic conditions; neighborhood values; interest rates; real estate tax rates; operating expenses of the mortgaged properties; supply of and demand for rental units or properties; ability to obtain and maintain adequate occupancy of the properties; zoning laws; governmental rules, regulations and fiscal policies; and acts of God.

Certain expenditures associated with the ownership of real estate, principally real estate taxes and maintenance costs, may adversely affect the income from the real estate. Therefore, the cost of operating real property may exceed the rental income earned from such property, and we may have to advance funds in order to protect our investment or we may be required to dispose of the real property at a loss. We may not be able to successfully manage our growth or implement our growth strategies, which may adversely affect our results of operations and financial condition. During the last five years, we have experienced significant growth, and a key aspect of our business strategy is our continued growth and expansion. Our ability to manage our growth successfully will depend on whether we can maintain capital levels adequate to support our growth, maintain cost controls and asset quality and successfully integrate any businesses we acquire into our organization. Our earnings growth relies, at least in part, on strategic acquisitions. Our ability to grow through selective acquisitions of financial institutions or branches will depend on successfully identifying, acquiring and integrating those institutions or branches. We may be unable to identify attractive acquisition candidates, make acquisitions on favorable terms or successfully integrate any acquired institutions or branches. In addition, we may fail to realize the growth opportunities and cost savings we anticipate to be derived from our acquisitions. Growth through acquisitions causes us to take on additional risks such as the risks of unknown or contingent liabilities, exposure to potential asset quality issues from acquired institutions, and the diversion of our management’s time and attention from our existing business and operations. Finally, it is possible that during the integration process of our acquisitions, we could lose key associates or the ability to maintain relationships with clients. As we continue to implement our growth strategy by opening new offices or through strategic acquisitions, we expect to incur increased personnel, occupancy and other operating expenses. In the case of new offices, we must absorb those higher expenses while we begin to generate new deposits, and there is a further time lag involved in redeploying new deposits into attractively priced loans and other higher yielding earning assets.

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We may need additional capital resources in the future and these capital resources may not be available when needed or at all. We may need to incur additional debt or equity financing in the future to make strategic acquisitions or investments or for future growth. Such financing may not be available to us on acceptable terms or at all. Confidential client information transmitted through our online banking service is vulnerable to security breaches and computer viruses, which could expose us to litigation and adversely affect our reputation and our ability to generate deposits. We provide our clients the ability to bank online. The secure transmission of confidential information over the Internet is a critical element of banking online. Our network could be vulnerable to unauthorized access, computer viruses, phishing schemes and other security problems. We may be required to spend significant capital and other resources to protect against the threat of security breaches and computer viruses, or to alleviate problems caused by security breaches or viruses. To the extent that our activities or the activities of our clients involve the storage and transmission of confidential information, security breaches and viruses could expose us to claims, litigation and other possible liabilities. Any inability to prevent security breaches or computer viruses could also cause existing clients to lose confidence in our systems and could adversely affect our reputation and our ability to generate deposits. We must comply with the Bank Secrecy Act and other anti-money laundering statutes and regulations. Since September 11, 2001, banking regulators have intensified their focus on anti-money laundering and Bank Secrecy Act compliance requirements, particularly the anti-money laundering provisions of the USA PATRIOT Act. There is also increased scrutiny of our compliance with the rules enforced by the Office of Foreign Assets Control. In order to comply with regulations, guidelines and examination procedures in this area, we have been required to adopt new policies and procedures and to install new systems. We cannot be certain that the policies, procedures and systems we have in place will permit us to fully comply with these laws. Furthermore, financial institutions that we have already acquired or may acquire in the future may or may not have had adequate policies, procedures and systems to fully comply with these laws. Whether our own policies, procedures and systems are deficient or the policies, procedures and systems of the financial institutions that we have already acquired or may acquire in the future are deficient, we would be subject to liability, including fines and regulatory actions such as restrictions on our ability to pay dividends and to obtain regulatory approvals necessary to proceed with certain aspects of our business plan, including our acquisition plans. Our controls and procedures may fail or be circumvented. We regularly review and update our internal controls, disclosure controls and procedures, and corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations and financial condition. We are exposed to operational risk because of providing certain services, which could adversely affect our results of operations. We are exposed to operational risk because of providing various fee-based services including electronic banking, item processing, data processing, correspondent banking, merchant services, and asset management. Operational risk is the risk of loss resulting from errors related to transaction processing, breaches of the internal control system and compliance requirements, fraud by employees or persons outside the company or business interruption due to system failures or other events. We continually assess and monitor operational risk in our business lines and provide for disaster and business recovery planning including geographical diversification of our facilities; however, the occurrence of various events including unforeseeable and unpreventable events such as hurricanes or other natural disasters could still damage our physical facilities or our computer systems or software, cause delay or disruptions to operational functions, impair our clients, vendors and counterparties and negatively impact our results of operations. Operational risk also includes potential legal or regulatory actions that could arise because of noncompliance with applicable laws and regulatory requirements that could have an adverse affect on our reputation.

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Our future success is dependent on our ability to compete effectively in the highly competitive banking industry. We face vigorous competition from other banks and other financial institutions, including savings and loan associations, savings banks, finance companies and credit unions for deposits, loans and other financial services in our market area. A number of these banks and other financial institutions are significantly larger than we are and have substantially greater access to capital and other resources, as well as larger lending limits and branch systems, and offer a wider array of banking services. To a limited extent, we also compete with other providers of financial services, such as money market mutual funds, brokerage firms, consumer finance companies, insurance companies and governmental organizations which may offer more favorable financing than we can. Many of our non-bank competitors are not subject to the same extensive regulations that govern us. As a result, these non-bank competitors have advantages over us in providing certain services. This competition may reduce or limit our margins and our market share and may adversely affect our results of operations and financial condition. We are subject to extensive regulation that could restrict our activities and impose financial requirements or limitations on the conduct of our business and limit our ability to receive dividends from the Bank. The Bank is subject to extensive regulation, supervision and examination by the Florida Office of Financial Regulation, the Federal Reserve, and the FDIC. As a member of the Federal Home Loan Bank, the Bank must also comply with applicable regulations of the Federal Housing Finance Board and the Federal Home Loan Bank. Regulation by these agencies is intended primarily for the protection of our depositors and the deposit insurance fund and not for the benefit of our shareowners. The Bank’s activities are also regulated under consumer protection laws applicable to our lending, deposit and other activities. A sufficient claim against us under these laws could have a material adverse effect on our results. Please refer to the Section entitled “Business – Regulatory Considerations” of this Report. Risks Related to an Investment in Our Common Stock Limited trading activity for shares of our common stock may contribute to price volatility. While our common stock is listed and traded on The NASDAQ Global Select Market, there has been limited trading activity in our common stock. The average daily trading volume of our common stock over the twelve-month period ending December 31, 2007 was approximately 39,385 shares. Due to the limited trading activity of our common stock, relativity small trades may have a significant impact on the price of our common stock. Our insiders have substantial control over matters requiring shareowner approval, including changes of control. Our insiders who own more than 5% of our common stock, directors, and executive officers, beneficially owned approximately 42.97% of the outstanding shares of our stock as of February 29, 2008. Accordingly, these principal shareowners, directors, and executive officers, if acting together, may be able to influence or control matters requiring approval by our shareowners, including the election of directors and the approval of mergers, acquisitions or other extraordinary transactions. They may also have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests. The concentration of ownership may have the effect of delaying, preventing or deterring a change of control of our company, could deprive our shareowners of an opportunity to receive a premium for their common stock as part of a sale of our company and might ultimately affect the market price of our common stock. Our Articles of Incorporation, Bylaws, and certain laws and regulations may prevent or delay transactions you might favor, including a sale or merger of CCBG. CCBG is registered with the Federal Reserve as a financial holding company under the Gramm-Leach-Bliley Act and is a bank holding company under the Bank Holding Company Act. As a result, we are subject to supervisory regulation and examination by the Federal Reserve. The Gramm-Leach-Bliley Act, the Bank Holding Company Act, and other federal laws subject financial holding companies to particular restrictions on the types of activities in which they may engage, and to a range of supervisory requirements and activities, including regulatory enforcement actions for violations of laws and regulations. Provisions of our Articles of Incorporation, Bylaws, certain laws and regulations and various other factors may make it more difficult and expensive for companies or persons to acquire control of us without the consent of our Board of Directors. It is possible, however, that you would want a takeover attempt to succeed because, for example, a potential buyer could offer a premium over the then prevailing price of our common stock.

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For example, our Articles of Incorporation permit our Board of Directors to issue preferred stock without shareowner action. The ability to issue preferred stock could discourage a company from attempting to obtain control of us by means of a tender offer, merger, proxy contest or otherwise. Additionally, our Articles of Incorporation and Bylaws divide our Board of Directors into three classes, as nearly equal in size as possible, with staggered three-year terms. One class is elected each year. The classification of our Board of Directors could make it more difficult for a company to acquire control of us. We are also subject to certain provisions of the Florida Business Corporation Act and our Articles of Incorporation that relate to business combinations with interested shareowners. Other provisions in our Articles of Incorporation or Bylaws that may discourage takeover attempts or make them more difficult include:

Supermajority voting requirements to remove a director from office; Provisions regarding the timing and content of shareowner proposals and nominations; Supermajority voting requirements to amend Articles of Incorporation unless approval is received by a majority of

“disinterested directors”; Absence of cumulative voting; and Inability for shareowners to take action by written consent.

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Item 1B. Unresolved Staff Comments None. Item 2. Properties We are headquartered in Tallahassee, Florida. Our executive office is in the Capital City Bank building located on the corner of Tennessee and Monroe Streets in downtown Tallahassee. The building is owned by the Bank, but is located on land leased under a long-term agreement. The Bank's Parkway Office is located on land leased from the Smith Interests General Partnership L.L.P. in which several directors and officers have an interest. The annual lease provides for payments of approximately $118,000, to be adjusted for inflation in future years. As of February 29, 2008, the Bank had 70 banking locations. Of the 70 locations, the Bank leases the land, buildings, or both at 14 locations and owns the land and buildings at the remaining 56. Item 3. Legal Proceedings We are party to lawsuits and claims arising out of the normal course of business. In management's opinion, there are no known pending claims or litigation, the outcome of which would, individually or in the aggregate, have a material effect on our consolidated results of operations, financial position, or cash flows. Item 4. Submission of Matters to a Vote of Security Holders None. PART II Item 5. Market for the Registrant's Common Equity, Related Shareowner Matters, and Issuer Purchases of Equity

Securities Common Stock Market Prices and Dividends Our common stock trades on the NASDAQ Global Select Market under the symbol "CCBG." The following table presents the range of high and low closing sales prices reported on the NASDAQ Global Select Market and cash dividends declared for each quarter during the past two years. We had a total of 1,750 shareowners of record as of February 29, 2008. 2007 2006

Fourth Qtr.

Third Qtr.

Second Qtr.

First Qtr.

Fourth Qtr.

Third Qtr.

Second Qtr.

First Qtr.

Common stock price: High $ 34.00 $ 36.40 $ 33.69 $ 35.91 $ 35.98 $ 33.25 $ 35.39 $ 37.97 Low 24.60 27.69 29.12 29.79 30.14 29.87 29.51 33.79 Close 28.22 31.20 31.34 33.30 35.30 31.10 30.20 35.55

Cash dividends declared per share .1850 .1750 .1750 .1750 .1750 .1625 .1625 .1625 Future payment of dividends will be subject to determination and declaration by our Board of Directors. Florida law limits our payment of dividends. There are also legal limits on the frequency and amount of dividends that CCB can pay us. See subsection entitled "Capital; Dividends; Sources of Strength" in the Business section on page 9, in the Management's Discussion and Analysis of Financial Condition and Operating Results on page 44 and Note 15 in the Notes to Consolidated Financial Statements. These restrictions may limit our ability to pay dividends to our shareowners. As of February 29, 2008, we do not believe these restrictions will impair our ability to declare and pay our routine and customary dividends.

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Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table contains information about all purchases made by or on behalf of us or any affiliated purchaser (as defined in Rule 10b-18(a)(3) under the Exchange Act) of shares or other units of any class of our equity securities that is registered pursuant to Section 12 of the Exchange Act.

Period

Total number of shares

purchased

Average price paid per share

Total number of shares purchased as

part of our share repurchase program(1)

Maximum Number of shares that

may yet be purchased under our share

repurchase program October 1, 2007 to October 31, 2007

69,338

$29.44

1,905,716

766,159

November 1, 2007 to November 30, 2007

222,004

26.86

2,119,720

552,155

December 1, 2007 to December 31, 2007

164,481

29.72

2,284,201

387,674

Total 455,823 $28.28 2,284,201 387,674 (1) This balance represents the number of shares that were repurchased through the Capital City Bank Group, Inc. Share

Repurchase Program (the “Program”), which was approved on March 30, 2000, and modified by our Board on January 24, 2002, March 22, 2007, and November 11, 2007 under which we were authorized to repurchase up to 2,671,875 shares of our common stock. The Program is flexible and shares are acquired from the public markets and other sources using free cash flow. There is no predetermined expiration date for the Program. No shares are repurchased outside of the Program. In November 2007, 8,000 shares were purchased by an affiliated purchaser that was outside of the Program.

Performance Graph This performance graph compares the cumulative total shareholder return on our common stock with the cumulative total shareholder return of the NASDAQ Composite Index and the SNL Financial LC $1B-$5B Bank Index for the past five years. The graph assumes that $100 was invested on December 31, 2002 in our common stock and each of the above indices, and that all dividends were reinvested. The shareholder return shown below represents past performance and should not be considered indicative of future performance.

Total Return Performance

75

100

125

150

175

200

225

12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07

Inde

x V

alue

Capital City Bank Group, Inc.

NASDAQ Composite

SNL Bank $1B-$5B Index

Period Ending Index 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 Capital City Bank Group, Inc. $ 100.00 $ 149.36 $ 138.15 $ 144.18 $ 151.39 $ 123.89 NASDAQ Composite 100.00 150.01 162.89 165.13 180.85 198.60 SNL $1B-$5B Bank Index 100.00 135.99 167.83 164.97 190.90 139.06

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Item 6. Selected Financial Data For the Years Ended December 31, (Dollars in Thousands, Except Per Share Data)(1) (3) 2007 2006 2005 2004 2003 Interest Income $ 165,323 $ 165,893 $ 140,053 $ 101,525 $ 94,830 Net Interest Income 112,241 119,136 109,990 86,084 79,991 Provision for Loan Losses 6,163 1,959 2,507 2,141 3,436 Net Income 29,683 33,265 30,281 29,371 25,193 Per Common Share:

Basic Net Income $ 1.66 $ 1.79 $ 1.66 $ 1.74 $ 1.53 Diluted Net Income 1.66 1.79 1.66 1.74 1.52 Cash Dividends Declared .710 .663 .619 .584 .525 Book Value 17.03 17.01 16.39 14.51 15.27

Key Performance Ratios:

Return on Average Assets 1.18% 1.29% 1.22% 1.46% 1.40%Return on Average Equity 9.68 10.48 10.56 13.31 12.82 Net Interest Margin (FTE) 5.25 5.35 5.09 4.88 5.01 Dividend Pay-Out Ratio 42.77 37.01 37.35 33.62 34.51 Equity to Assets Ratio 11.19 12.15 11.65 10.86 10.98

Asset Quality:

Allowance for Loan Losses $ 18,066 $ 17,217 $ 17,410 $ 16,037 $ 12,429 Allowance for Loan Losses to Loans 0.95% 0.86% 0.84% 0.88% 0.93%Nonperforming Assets 28,163 8,731 5,550 5,271 7,301 Nonperforming Assets to Loans + ORE 1.47 0.44 0.27 0.29 0.54 Allowance to Nonperforming Loans 71.92 214.09 331.11 345.18 529.80 Net Charge-Offs to Average Loans 0.27 0.11 0.13 0.22 0.27

Averages for the Year:

Loans, Net $ 1,934,850 $ 2,029,397 $ 1,968,289 $ 1,538,744 $ 1,318,080 Earning Assets 2,183,528 2,258,277 2,187,672 1,789,843 1,624,680 Total Assets 2,507,217 2,581,078 2,486,733 2,006,745 1,804,895 Deposits 1,990,446 2,034,931 1,954,888 1,599,201 1,431,808 Subordinated Notes 62,887 62,887 50,717 5,155 - Long-Term Borrowings 37,936 57,260 70,216 59,462 55,594 Shareowners' Equity 306,617 317,336 286,712 220,731 196,588

Year-End Balances:

Loans, Net $ 1,915,850 $ 1,999,721 $ 2,067,494 $ 1,828,825 $ 1,341,632 Earning Assets 2,272,829 2,270,410 2,299,677 2,113,571 1,648,818 Total Assets 2,616,327 2,597,910 2,625,462 2,364,013 1,846,502 Deposits 2,142,344 2,081,654 2,079,346 1,894,886 1,474,205 Subordinated Notes 62,887 62,887 62,887 30,928 - Long-Term Borrowings 26,731 43,083 69,630 68,453 46,475 Shareowners' Equity 292,675 315,770 305,776 256,800 202,809

Other Data:

Basic Average Shares Outstanding 17,909,396 18,584,519 18,263,855 16,805,696 16,528,109 Diluted Average Shares Outstanding 17,911,587 18,609,839 18,281,243 16,810,926 16,563,986 Shareowners of Record(2) 1,750 1,805 1,716 1,598 1,512 Banking Locations(2) 70 69 69 60 57 Full-Time Equivalent Associates(2) 1,097 1,056 1,013 926 795

(1) All share and per share data have been adjusted to reflect the 5-for-4 stock split effective July 1, 2005, and the 5-for-4 stock

split effective June 13, 2003. (2) As of the record date. The record date is on or about March 1st of the following year. (3) The consolidated financial statements reflect the acquisitions of Quincy State Bank on March 19, 2004, Farmers and

Merchants Bank of Dublin on October 15, 2004, and First Alachua Banking Corporation on May 20, 2005.

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Management’s discussion and analysis ("MD&A") provides supplemental information, which sets forth the major factors that have affected our financial condition and results of operations and should be read in conjunction with the Consolidated Financial Statements and related notes included in the Annual Report on Form 10-K. The MD&A is divided into subsections entitled "Business Overview," "Financial Overview," "Results of Operations," "Financial Condition," "Liquidity and Capital Resources," "Off-Balance Sheet Arrangements," and "Accounting Policies." The following information should provide a better understanding of the major factors and trends that affect our earnings performance and financial condition, and how our performance during 2007 compares with prior years. Throughout this section, Capital City Bank Group, Inc., and its subsidiary, collectively, are referred to as "CCBG," "Company," "we," "us," or "our." In this MD&A, we present an operating efficiency ratio and an operating net noninterest expense as a percent of average assets ratio, both of which are not calculated based on accounting principles generally accepted in the United States ("GAAP"), but that we believe provide important information regarding our results of operations. Our calculation of the operating efficiency ratio is computed by dividing noninterest expense less intangible amortization and merger expenses, by the sum of tax equivalent net interest income and noninterest income. We calculate our operating net noninterest expense as a percent of average assets by subtracting noninterest expense excluding intangible amortization and merger expenses from noninterest income. Management uses these non-GAAP measures as part of its assessment of its performance in managing noninterest expenses. We believe that excluding intangible amortization and merger expenses in our calculations better reflect our periodic expenses and is more reflective of normalized operations. Although we believe the above-mentioned non-GAAP financial measures enhance investors’ understanding of our business and performance these non-GAAP financial measures should not be considered an alternative to GAAP. In addition, there are material limitations associated with the use of these non-GAAP financial measures such as the risks that readers of our financial statements may disagree as to the appropriateness of items included or excluded in these measures and that our measures may not be directly comparable to other companies that calculate these measures differently. Our management compensates for these limitations by providing detailed reconciliations between GAAP information and the non-GAAP financial measure as detailed below. Reconciliation of operating efficiency ratio to efficiency ratio: For the Years Ended December 31, 2007 2006 2005 Efficiency ratio 70.13% 68.87% 68.46% Effect of intangible amortization and merger expenses (3.36)% (3.45)% (3.67)% Operating efficiency ratio 66.77% 65.42% 64.79% Reconciliation of operating net noninterest expense ratio: For the Years Ended December 31, 2007 2006 2005 Net noninterest expense as a percent of average assets 2.50% 2.56% 2.44% Effect of intangible amortization and merger expenses (0.13)% (0.24)% (0.24)% Operating net noninterest expense as a percent of average assets 2.37% 2.32% 2.20%

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CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K, including this MD&A section, contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among others, statements about our beliefs, plans, objectives, goals, expectations, estimates and intentions that are subject to significant risks and uncertainties and are subject to change based on various factors, many of which are beyond our control. The words "may," "could," "should," "would," "believe," "anticipate," "estimate," "expect," "intend," "plan," "target," "goal," and similar expressions are intended to identify forward-looking statements. All forward-looking statements, by their nature, are subject to risks and uncertainties. Our actual future results may differ materially from those set forth in our forward-looking statements. Please see the Introductory Note and Item 1A Risk Factors of this Annual Report for a discussion of factors that could cause our actual results to differ materially from those in the forward-looking statements. However, other factors besides those listed in Item 1A Risk Factors or discussed in this Annual Report also could adversely affect our results, and you should not consider any such list of factors to be a complete set of all potential risks or uncertainties. Any forward-looking statements made by us or on our behalf speak only as of the date they are made. We do not undertake to update any forward-looking statement, except as required by applicable law. BUSINESS OVERVIEW We are a financial holding company headquartered in Tallahassee, Florida and we are the parent of our wholly-owned subsidiary, Capital City Bank (the "Bank" or "CCB"). The Bank offers a broad array of products and services through a total of 70 full-service offices located in Florida, Georgia, and Alabama. The Bank also has a two mortgage lending offices located in Florida and one additional Georgia community. The Bank offers commercial and retail banking services, as well as trust and asset management, merchant services, retail securities brokerage and data processing services. Our profitability, like most financial institutions, is dependent to a large extent upon net interest income, which is the difference between the interest received on earning assets, such as loans and securities, and the interest paid on interest-bearing liabilities, principally deposits and borrowings. Results of operations are also affected by the provision for loan losses, operating expenses such as salaries and employee benefits, occupancy and other operating expenses including income taxes, and noninterest income such as service charges on deposit accounts, asset management and trust fees, retail securities brokerage fees, mortgage banking revenues, merchant service fees, and data processing revenues. Our philosophy is to grow and prosper, building long-term relationships based on quality service, high ethical standards, and safe and sound banking practices. We maintain a locally oriented, community-based focus, which is augmented by experienced, centralized support in select specialized areas. Our local market orientation is reflected in our network of banking office locations, experienced community executives with a dedicated President for each market, and community boards which support our focus on responding to local banking needs. We strive to offer a broad array of sophisticated products and to provide quality service by empowering associates to make decisions in their local markets. Our long-term vision is to continue our expansion, emphasizing a combination of growth in existing markets and acquisitions. Acquisitions will continue to be focused on a three state area including Florida, Georgia, and Alabama with a particular focus on financial institutions, which are $100 million to $400 million in asset size and generally located on the outskirts of major metropolitan areas. Five markets have been identified, four in Florida and one in Georgia, in which management will proactively pursue expansion opportunities. These markets include Alachua, Marion, Hernando, and Pasco counties in Florida and the western panhandle in Florida and Bibb and surrounding counties in central Georgia. We continue to evaluate de novo expansion opportunities in attractive new markets in the event that acquisition opportunities are not feasible. Expansion opportunities that will be evaluated include asset management and mortgage banking. Recent Acquisition. On May 20, 2005, we completed our merger with First Alachua Banking Corporation ("FABC"), headquartered in Alachua, Florida. We issued approximately 906,000 shares of common stock and paid approximately $29.0 million in cash for a total purchase price of $58.0 million. FABC's wholly-owned subsidiary, First National Bank of Alachua, had $228.3 million in assets at closing with seven offices in Alachua County and an eighth office in Hastings, Florida, which is in St. Johns County.

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FINANCIAL OVERVIEW A summary overview of our financial performance for 2007 versus 2006 is provided below. 2007 Financial Performance Highlights –

2007 earnings of $29.7 million, or $1.66 per diluted share, decreases of 10.8% and 7.3%, respectively, over 2006. Decline in earnings was attributable to lower net interest income and a higher loan loss provision, partially offset by an

increase in noninterest income. Tax equivalent net interest income fell 5.2% over 2006 due to higher interest expense driven by higher average rates and an

unfavorable shift in deposit mix as clients sought higher yielding deposit products, and a $75.0 million reduction in the level of average earning assets.

Net interest margin percentage declined 10 basis points from 2006 driven by both a higher cost of funds and an increase in

foregone interest income associated with a higher level of nonperforming assets. Noninterest income grew 6.7% over 2006 due primarily to higher deposit fees, data processing fees, and card fees.

Noninterest expense was very well controlled during the year and increased only .35% from 2006, including a litigation

reserve accrual of $1.9 million related to lawsuits filed against Visa U.S.A.

Loan loss provision increased $4.2 million from 2006 due to a higher level of net charge-offs ($5.3 million, or .27% of average loans in 2007) and a higher level of required reserves reflective of the current credit environment that has been impacted by a slowdown in housing and real estate markets. At year-end 2007, the allowance for loan losses was .95% of outstanding loans and provided coverage of 72% of nonperforming loans.

Share repurchase activity continued in 2007 with 1,404,364 shares being repurchased during the year. We remain well-

capitalized with a risk based capital ratio of 14.05%.

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RESULTS OF OPERATIONS Net income for 2007 totaled $29.7 million ($1.66 per diluted share) compared to $33.3 million ($1.79 per diluted share) in 2006 and $30.3 million ($1.66 per diluted share) in 2005. Earnings per share reflect the repurchase of 1,404,364 common shares during 2007 and 164,596 common shares during 2006. The earnings decline in 2007 of $3.6 million, or $0.13 per diluted share, reflects lower operating revenues (defined as the total of net interest income and noninterest income) of $3.2 million, an increase in the loan loss provision of $4.2 million, and slightly higher noninterest expense of $0.4 million, partially offset by lower income taxes of $4.2 million. The growth in earnings for 2006 of $3.0 million, or $0.13 per diluted share, was primarily attributable to growth in operating revenue of $15.5 million and a reduction in the loan loss provision of $0.5 million, partially offset by an increase in noninterest expense of $11.8 million and income taxes of $1.3 million. The increase in operating revenue was driven by an 8.3% increase in net interest income and a 13.0% increase in noninterest income. The increase in revenues and expenses is partially attributable to our acquisition of the First National Bank of Alachua in May 2005. A condensed earnings summary for the last three years is presented in Table 1 below: Table 1 CONDENSED SUMMARY OF EARNINGS For the Years Ended December 31, (Dollars in Thousands, Except Per Share Data)(1) 2007 2006 2005 Interest Income $ 165,323 $ 165,893 $ 140,053Taxable Equivalent Adjustments 2,420 1,812 1,222Total Interest Income (FTE) 167,743 167,705 141,275Interest Expense 53,082 46,757 30,063Net Interest Income (FTE) 114,661 120,948 111,212Provision for Loan Losses 6,163 1,959 2,507Taxable Equivalent Adjustments 2,420 1,812 1,222Net Interest Income After Provision for Loan Losses 106,078 117,177 107,483Noninterest Income 59,300 55,577 49,198Noninterest Expense 121,992 121,568 109,814Income Before Income Taxes 43,386 51,186 46,867Income Taxes 13,703 17,921 16,586Net Income $ 29,683 $ 33,265 $ 30,281

Basic Net Income Per Share $ 1.66 $ 1.79 $ 1.66Diluted Net Income Per Share $ 1.66 $ 1.79 $ 1.66 (1) All share and per share data have been adjusted to reflect the 5-for-4 stock split effective July 1, 2005.

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Net Interest Income Net interest income represents our single largest source of earnings and is equal to interest income and fees generated by earning assets, less interest expense paid on interest bearing liabilities. We provide an analysis of our net interest income, including average yields and rates in Tables 2 and 3. We provide this information on a "taxable equivalent" basis to reflect the tax-exempt status of income earned on certain loans and investments, the majority of which are state and local government debt obligations. In 2007, our taxable equivalent net interest income decreased $6.3 million, or 5.2%. This follows an increase of $9.7 million, or 8.8%, in 2006, and an increase of $23.9 million, or 27.4%, in 2005. The decrease in our taxable equivalent net interest income in 2007 resulted from an increase in interest expense driven by higher average rates, an unfavorable shift in our deposit mix as clients sought higher yielding deposit products, and a $75 million reduction in the level of average earning assets. For the year 2007, taxable equivalent interest income was constant compared to 2006 at $167.7 million, and increased $26.4 million, or 18.7%, in 2006 over 2005. Taxable equivalent interest income was favorably impacted by the higher rate environment in 2007 as compared to 2006, resulting in higher yields on our earning assets during 2007, but the higher yields were offset by a net decrease in average earning assets of $74.7 million and an increase in foregone interest income attributable to the rising level of nonperforming assets, which increased from $8.7 million at year-end 2006 to $28.2 million at year-end 2007. The higher rate environment during 2007 produced a 26 basis point improvement in the yield on earning assets, which increased from 7.42% in 2006 to 7.68% for 2007. This compares to a 96 basis point improvement in 2006 over 2005. As shown in Table 3, increases to interest income in the investment securities portfolio and funds sold where offset by a decline in the loan portfolio attributable to a $94.5 million decline in average loans during 2007. Interest income is expected to decline during 2008, reflecting the lower interest rate environment stemming from reductions in the Federal Reserve’s target rate during the fourth quarter and the impact of foregone interest income associated with the current level of nonperforming assets. Interest expense increased $6.3 million, or 13.5%, over 2006, and $16.7 million, or 55.5%, in 2006 over 2005. The increase was a result of higher average interest rates in 2007 and an unfavorable shift in the deposit mix as clients sought higher yielding deposit products. Interest expense on other long–term borrowings declined from the prior year attributable to maturing FHLB advances which were not renewed or replaced during the year. The average rate paid on interest bearing liabilities in 2007 increased 39 basis points compared to 2006, reflecting the factors mentioned above. Interest expense is expected to trend downward in 2008 driven by the lower rate environment, offset partially by a continued shift to higher yielding deposits. Our interest rate spread (defined as the taxable equivalent yield on average earning assets less the average rate paid on interest bearing liabilities) decreased 13 basis points in 2007 compared to 2006 and increased 11 basis points in 2006 compared to 2005. The decrease in 2007 was primarily attributable to the higher rates paid on deposits. Our net interest margin (defined as taxable equivalent interest income less interest expense divided by average earning assets) was 5.25% in 2007, compared to 5.35% in 2006 and 5.09% in 2005. In 2007, the decline was a result of a 36 basis point increase in our cost of funds, partially offset by a 26 basis point increase in the earning asset yield. During the last four months of 2007, the Federal Reserve reduced the federal funds rate by 100 basis points. Additionally, Capital City Bank was the beneficiary of some large balance deposit transfers from the Florida State Board of Administration’s Local Government Investment Pool. These new deposits took the form of negotiated public deposits and resulted in a significant increase (in excess of $200 million) in the bank’s NOW accounts late in the fourth quarter. Both of these events impacted net interest income and the net interest margin percentage during the fourth quarter. Overall, by aggressively lowering deposit interest rates, management believes we have been fairly successful in neutralizing the impact of the Federal Reserve’s interest rate reductions. While the higher cost public funds have been priced to produce a positive interest rate spread and will add to net interest income, the margin is thin, and therefore, due to the volume of these new deposits, there will be an adverse impact on our net interest margin percentage going forward. A further discussion of both of these events can be found in the sections entitled "Financial Condition" and “Results of Operations – Fourth Quarter 2007.”

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Table 2 AVERAGE BALANCES AND INTEREST RATES 2007 2006 2005 (Taxable Equivalent Basis - Dollars in Thousands) Balance Interest Rate Balance Interest Rate Balance Interest Rate ASSETS Loans, Net of Unearned Interest(1)(2) $ 1,934,850 $ 155,434 8.03% $ 2,029,397 $ 157,227 7.75% $ 1,968,289 $ 133,665 6.79%Taxable Investment Securities 103,840 4,949 4.76 112,392 4,851 4.31 142,406 4,250 2.98 Tax-Exempt Investment Securities(2) 84,849 4,447 5.24 74,634 3,588 4.81 49,252 2,369 4.81 Funds Sold 59,989 2,913 4.79 41,854 2,039 4.81 27,725 991 3.53 Total Earning Assets 2,183,528 167,743 7.68% 2,258,277 167,705 7.42% 2,187,672 141,275 6.46%Cash & Due From Banks 86,692 100,237 105,787 Allowance for Loan Losses (17,535) (17,486) (17,081) Other Assets 254,532 240,050 210,355 TOTAL ASSETS $ 2,507,217 $ 2,581,078 $ 2,486,733

LIABILITIES NOW Accounts $ $557,060 $ 10,748 1.93% $ 518,671 $ 7,658 1.48% $ 430,601 $ 2,868 .67%Money Market Accounts 397,193 13,667 3.44 370,257 11,687 3.16 275,830 4,337 1.57 Savings Accounts 119,700 279 0.23 134,033 278 0.21 152,890 292 0.19 Other Time Deposits 474,728 19,993 4.21 507,283 17,630 3.48 550,821 13,637 2.48 Total Interest Bearing Deposits 1,548,681 44,687 2.89% 1,530,244 37,253 2.43% 1,410,142 21,134 1.50%Short-Term Borrowings 66,397 2,871 4.31 78,700 3,074 3.89 97,863 2,854 2.92 Subordinated Notes Payable 62,887 3,730 5.93 62,887 3,725 5.92 50,717 2,981 5.88 Other Long-Term Borrowings 37,936 1,794 4.73 57,260 2,705 4.72 70,216 3,094 4.41 Total Interest Bearing Liabilities 1,715,901 53,082 3.09% 1,729,091 46,757 2.70% 1,628,938 30,063 1.85%Noninterest Bearing Deposits 441,765 504,687 544,746 Other Liabilities 42,934 29,964 26,337 TOTAL LIABILITIES 2,200,600 2,263,742 2,200,021 SHAREOWNERS' EQUITY TOTAL SHAREOWNERS' EQUITY 306,617 317,336 286,712 TOTAL LIABILITIES & EQUITY $ 2,507,217 $ 2,581,078 $ 2,486,733

Interest Rate Spread 4.59% 4.72% 4.61%Net Interest Income $ 114,661 $ 120,948 $ 111,212

Net Interest Margin(3) 5.25% 5.35% 5.09%

(1) Average balances include nonaccrual loans. Interest income includes loan fees of $3.0 million, $3.8 million, and $3.1 million in 2007, 2006, and 2005, respectively. (2) Interest income includes the effects of taxable equivalent adjustments using a 35% tax rate. (3) Taxable equivalent net interest income divided by average earning assets.

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Table 3 RATE/VOLUME ANALYSIS (1) 2007 Changes From 2006 2006 Changes From 2005 Due to Average Due to Average (Taxable Equivalent Basis - Dollars in Thousands) Total Volume Rate Total Volume Rate Earning Assets: Loans, Net of Unearned Interest (2) $ (1,792) $ (7,465) $ 5,673 $ 23,562 $ 5,760 $ 17,802 Investment Securities: Taxable 99 (350) 449 601 (689) 1,290 Tax-Exempt (2) 858 491 367 1,219 1,220 (1) Funds Sold 873 883 (10) 1,048 444 604 Total 38 (6,441) 6,479 26,430 6,735 19,695 Interest Bearing Liabilities: NOW Accounts 3,090 567 2,523 4,790 586 4,204 Money Market Accounts 1,979 850 1,129 7,350 1,485 5,865 Savings Accounts 2 (29) 31 (14) (36) 22 Time Deposits 2,364 (1,131) 3,495 3,993 (1,078) 5,071 Short-Term Borrowings (204) (424) 220 221 (586) 807 Subordinated Notes Payable 5 0 5 744 715 29 Long-Term Borrowings (911) (913) 2 (390) (571) 181 Total 6,325 (1,080) 7,405 16,694 515 16,179 Changes in Net Interest Income $ (6,287) $ (5,361) $ (926) $ 9,736 $ 6,220 $ 3,516 (1) This table shows the change in taxable equivalent net interest income for comparative periods based on either changes in average volume or changes in average rates for earning assets and interest bearing liabilities. Changes which

are not solely due to volume changes or solely due to rate changes have been attributed to rate changes. (2) Interest income includes the effects of taxable equivalent adjustments using a 35% tax rate to adjust interest on tax-exempt loans and securities to a taxable equivalent basis.

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Provision for Loan Losses The provision for loan losses was $6.2 million in 2007, compared to $2.0 million in 2006 and $2.5 million in 2005. The increase for 2007 was attributable to an increase in net charge-offs and a higher level of required reserves reflective of the current credit environment that has been impacted by a slowdown in housing and real estate markets. The lower loan loss provision in 2006 generally reflected a lower level of net charge-offs. The loan loss provision in 2005 was positively impacted by a re-assessment of the allowance for loan losses to reflect the changing risk profile associated with the Bank’s sale of its credit card portfolio during the third quarter of 2004 and the integration of acquisitions. Net charge-offs for 2007 totaled $5.3 million, or .27% of average loans for the year compared to $2.1 million, or .11% for 2006 and $2.5 million, or .13% for 2005. At December 31, 2007, the allowance for loan losses totaled $18.1 million compared to $17.2 million in 2006 and $17.4 million in 2005. At year-end 2007, the allowance represented .95% of total loans and provided coverage of 72% of nonperforming loans. Management considers the allowance to be adequate based on the current level of nonperforming loans and the estimate of losses inherent in the portfolio at year-end. See the section entitled "Financial Condition" and Tables 7 and 8 for further information regarding the allowance for loan losses. Noninterest Income Noninterest income increased $3.7 million, or 6.7% and $6.4 million or 13.0%, in 2007 and 2006, respectively compared to the immediately preceding year. In both periods all categories enjoyed appreciable gains with the exception of mortgage banking, which has been adversely impacted by the slowdown in residential housing market. The table below reflects the major components of noninterest income. For the Years Ended December 31, (Dollars in Thousands) 2007 2006 2005 Noninterest Income:

Service Charges on Deposit Accounts $ 26,130 $ 24,620 $ 20,740Data Processing 3,133 2,723 2,610Asset Management Fees 4,700 4,600 4,419Retail Brokerage Fees 2,510 2,091 1,322Gain/(Loss) on Sale/Call of Investment Securities 14 (4) 9Mortgage Banking Revenues 2,596 3,235 4,072Merchant Fees(1) 7,257 6,978 6,174Interchange Fees(1) 3,757 3,105 2,239ATM/Debit Card Fees(1) 2,692 2,519 2,206Other 6,511 5,710 5,407

Total Noninterest Income $ 59,300 $ 55,577 $ 49,198

(1) Together called “Bank Card Fees” Various significant components of noninterest income are discussed in more detail below. Service Charges on Deposit Accounts. Deposit service charge fees increased $1.5 million, or 6.1%, in 2007, compared to an increase of $3.9 million, or 18.7%, in 2006. Deposit service charge revenues in any one year are dependent on the number of accounts, primarily transaction accounts, the level of activity subject to service charges, and the collection rate. The increase in deposit fees in both years was due to higher overdraft and nonsufficient funds ("NSF") fees reflecting higher activity levels, partially attributable to the growth in our "Absolutely Free” checking account product, and improved fee collection efforts. The improvement in fees for 2006 also reflects growth in deposit accounts attributable to the First National Bank of Alachua acquisition. Asset Management Fees. In 2007, asset management fees increased $100,000, or 2.2%, versus an increase of $181,000, or 4.1%, in 2006. At year-end 2007, assets under management totaled $781.3 million, reflecting net growth of $27.8 million, or 3.7% over 2006. At year-end 2006, assets under management totaled $753.5 million, reflecting net growth of $60.5 million, or 8.7% over 2005. The increase in 2007 primarily reflects growth in new business, while the improvement in 2006 reflects both new business growth and improved asset returns. Mortgage Banking Revenues. In 2007, mortgage banking revenues decreased $639,000, or 19.8%, compared to a decrease of $838,000, or 20.6% in 2006. The decline in both years reflects lower production due to the slower housing market. We generally sell all fixed rate residential loan production into the secondary market. Market conditions, the level of interest rates, and the percent of fixed rate production have significant impacts on our mortgage banking revenues.

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Bank Card Fees. Card fees (including merchant service fees, interchange fees, and ATM/debit card fees) increased $1.1 million, or 8.7% in 2007, compared to an increase of $2.0 million, or 18.7% in 2006. Merchant services fees increased $279,000, or 4.0% in 2007 compared to $805,000, or 13.0% in 2006. The improvement in both periods is directly related to growth in merchant card transaction volume primarily driven by growth in our client base. Interchange fees increased $651,000, or 21.0% in 2007 compared to $866,000, or 38.7% in 2006, and ATM/debit card fees improved $173,000, or 6.8% in 2007 compared to $313,000, or 14.2% in 2006. The higher interchange and ATM/debit card fees for both periods reflect an increase in our card base primarily associated with growth in transaction deposit accounts. Noninterest income as a percent of average assets was 2.37% in 2007, compared to 2.15% in 2006, and 1.98% in 2005. Higher deposit fees and card fees drove the improvement in 2006 and 2007. Noninterest income as a percent of taxable equivalent operating revenues was 34.1% in 2007, up from 31.5% in 2006 reflecting growth in noninterest income and a slight reduction in the level of operating revenues. Noninterest Expense Noninterest expense grew by $424,000, or 0.35%, over 2006, including a $1.9 million litigation reserve recorded in the fourth quarter of 2007. Compensation expense reflects reduced expense levels for performance based incentive plans and lower pension expense. Lower expense for courier also contributed positively. A pre-tax charge of $1.9 million was recorded during the fourth quarter of 2007 to establish a litigation reserve related to Visa U.S.A.’s “covered” litigation. The reserve is based on Capital City Bank’s proportionate membership interest in Visa U.S.A. and represents a contingent liability to cover potential settlement costs associated with various lawsuits filed against Visa U.S.A. This litigation reserve is discussed in more detail below. Noninterest expense increased $11.8 million, or 10.7%, in 2006 due to higher expense for compensation, occupancy, intangible amortization, and interchange fees. The increase reflects a full twelve months of expenses for the operations of First National Bank of Alachua, which was acquired in May 2005. The table below reflects the major components of noninterest expense. For the Years Ended December 31, (Dollars in Thousands) 2007 2006 2005 Noninterest Expense:

Salaries $ 49,206 $ 46,604 $ 40,978Associate Benefits 11,073 14,251 12,709

Total Compensation 60,279 60,855 53,687

Premises 9,347 9,395 8,293Equipment 9,890 9,911 8,970

Total Occupancy 19,237 19,306 17,263

Legal Fees 1,739 1,734 1,827Professional Fees 3,855 3,402 3,825Processing Services 1,994 1,863 1,481Advertising 3,742 4,285 4,275Travel and Entertainment 1,470 1,664 1,414Printing and Supplies 2,124 2,472 2,372Telephone 2,373 2,323 2,493Postage 1,565 1,145 1,195Intangible Amortization 5,834 6,085 5,440Merger Expense - - 438Interchange Fees 6,118 6,010 5,402Courier Service 641 1,307 1,360Miscellaneous 11,021 9,117 7,342

Total Other 42,476 41,407 38,864 Total Noninterest Expense $ 121,992 $ 121,568 $ 109,814

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Compensation. Salaries and associate benefits expense decreased $577,000, or 0.95% from 2006 primarily attributable to lower expense for pension ($1.4 million) and stock based compensation ($2.0 million). A $2.6 million, or 6.0% increase in associate salaries partially offset these declines. Pension expense declined as a result of large contributions and strong investment returns on pension plan assets over the past three years, and an increase in the weighted-average discount rate from 2006 to 2007. The lower expense for stock based compensation is reflective of performance goals not being met during 2007. In 2006, salaries and benefits increased $7.2 million, or 13.4%, over 2005. The increase in compensation was driven by higher expense for associate salaries ($5.4 million), payroll taxes ($300,000), associate insurance ($329,000), pension plan ($378,000), and stock-based compensation ($705,000). The increase in associate salaries and payroll tax expense reflects the addition of First National Bank of Alachua associates in May 2005, annual merit/market based raises for associates, and lower realized loan cost. Realized loan cost reflects the impact of Statement of Financial Accounting Standards (“SFAS”) No. 91 "Accounting for Nonrefundable Fees and Costs Associated with Acquiring Loans", which requires deferral and amortization of loan costs that are accounted for as a credit offset to salary expense. The decrease in the number of loans originated in 2006 reduced the amount of this offset. The increase in expense for insurance and pension benefits is reflective of an increase in eligible participants. The higher pension expense is also due to a lower discount rate used for the 2006 expense projection. Higher stock based compensation reflects an increase in plan participants and higher target awards due to the adoption of our new Stock-based Incentive Compensation Plan, which rewards our senior management team for meeting certain earnings performance milestones. Occupancy. Occupancy expense (including furniture, fixtures and equipment) decreased by $69,000, or 0.36% in 2007, compared to a $2.0 million, or 11.8% increase in 2006. For 2007, we realized a decrease in depreciation (furniture, fixtures, and equipment) expense of $472,000 and maintenance and repairs (buildings) expense of $254,000. Partially offsetting these declines were increases in maintenance and repairs (furniture, fixtures, and equipment) expense of $273,000 and software license expense of $230,000. The reduction in depreciation (furniture, fixtures, and equipment) was due to several large capital assets that became fully depreciated during 2007. The lower expense for maintenance and repairs (buildings) reflects management’s efforts to better manage this expense. The increase in expense for maintenance and repairs (furniture, fixtures, and equipment) primarily reflects the cost of new/replacement telecommunications and network cabling associated with the implementation of voice over IP and remote office capture technology during 2007. The increase in software license expense primarily reflects the purchase of certain technology aimed at improving our sales monitoring, operational procedures, and budgeting/planning efforts. The increase in 2006 was due to higher expense for depreciation ($895,000), maintenance and repairs - for our buildings as well as furniture, fixtures, and equipment ($276,000), utilities ($343,000), maintenance agreements ($364,000), and building insurance ($143,000). The increase in depreciation is due to the addition of First National Bank of Alachua offices as well as renovations. An increase in our general maintenance expense associated with banking offices, core processing/networking systems and ATMs drove the increase in maintenance and repairs. Utility expense increased due to a mid-year rate hike and the addition of First National Bank of Alachua in May 2005. The increase in expense for maintenance agreements is primarily due to an increase in core processing and networking costs partially attributable to enhancement of our back-up and recovery capabilities. The addition of new/replacement offices, office renovations, and an insurance premium increase drove the increase in building insurance. Other. Other noninterest expense increased $1.3 million, or 3.7%, in 2007, compared to $2.5 million, or 6.5% in 2006. The increase in 2007 was primarily attributable to a pre-tax charge of $1.9 million, which was recorded in the fourth quarter of 2007 to establish a litigation reserve. The Bank is a member of Visa U.S.A. and this reserve was established in connection with lawsuits filed against Visa U.S.A., which is generally referred to as the “Covered” litigation. We currently anticipate that our proportional share of the proceeds of Visa’s planned IPO will more than offset any liabilities related to our pro-rata share of the “Covered” litigation. The nature and circumstances regarding this charge, which is expected to be reversed upon consummation of Visa Inc.’s planned IPO, is explained in Form 8-Ks filed with the SEC on January 10, 2008 and January 22, 2008. The increase in 2006 was attributable primarily to higher expense for: (1) processing services - $382,000, (2) travel and entertainment - $250,000, (3) intangible amortization - $645,000, (4) interchange fees - $608,000, and (5) miscellaneous - $1.4 million. The increase in processing services is due to the addition of core processing system applications and system upgrade and enhancements. The higher expense for travel and entertainment is due primarily to an increase in associate training and company events during the year. The increase in intangible amortization reflects new core deposit amortization from the First National Bank of Alachua acquisition. The increase in interchange fees is due to increased merchant card transaction volume. Miscellaneous expense grew due to increases in other losses, ATM/debit card production, associate hiring and training expense. The operating net noninterest expense ratio (defined as noninterest income minus noninterest expense, net of intangible amortization and merger expenses, as a percent of average assets) was 2.27% in 2007 compared to 2.32% in 2006, and 2.20% in 2005. Our operating efficiency ratio (expressed as noninterest expense, net of intangible amortization and merger expenses, as a percent of taxable equivalent net interest income plus noninterest income) was 66.8%, 65.4%, and 64.8% in 2007, 2006 and 2005, respectively. During 2007, we took steps to strengthen our expense control procedures, including enhancement of current expense policies, creation of an expense control committee to focus on identifying cost savings strategies, and improve accountability for expense management across our various divisions – these efforts will continue and are now part of our strategic planning process. The increase in the operating efficiency ratio during 2007 is reflective of a lower level of operating revenues (tax equivalent net interest income plus noninterest income).

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Income Taxes The consolidated provision for federal and state income taxes was $13.7 million in 2007, compared to $17.9 million in 2006, and $16.6 million in 2005. Lower taxable income drove the decline in the tax provision for 2007. The increases in 2006 and 2005 were due to higher taxable income driven by earnings growth. Lower tax-exempt income also contributed to the increase in 2005. The effective tax rate was 31.6% in 2007, 35.0% in 2006, and 35.4% in 2005. These rates differ from the combined federal and state statutory tax rates due primarily to tax-exempt income on loans and securities. The 2007 effective tax rate was positively impacted by a higher level of tax-free loan income and a fourth quarter true-up of our deferred tax liabilities which resulted in a net reduction in our income tax provision of $937,000. FINANCIAL CONDITION Average assets totaled $2.5 billion, a decrease of $73.9 million, or 2.9%, in 2007 versus the comparable period in 2006. Average earning assets for 2007 were $2.2 billion, representing a decrease of $74.7 million, or 3.3%, over 2006. A decline in average loans of $94.5 million, or 4.7%, partially offset by an increase to average funds sold of $8.1 million, or 43.3% were the reasons for the earning asset decrease in 2007. We discuss these variances in more detail below. Table 2 provides information on average balances and rates, Table 3 provides an analysis of rate and volume variances, and Table 4 highlights the changing mix of our earning assets over the last three years. Loans Average loans decreased $94.5 million, or 4.7%, over the comparable period in 2006. Loans as a percent of average earning assets declined to 88.6% in 2007, down from the 2006 level of 90.0%. Our loan has declined due to a high level of principal pay-downs and loan pay-offs, including the pay-off of several larger commercial loans, and a slowing of lending activity. Minimal growth during 2007 was experienced in the consumer portfolio, primarily in auto finance and home equity lines of credit. Average loans during the fourth quarter of 2007 increased slightly from the linked quarter attributable to a slowing in loan pay-offs. Although management is continually evaluating alternative sources of revenue, lending is a major component of our business and is key to our profitability. While we strive to identify opportunities to increase loans outstanding and enhance the portfolio's overall contribution to earnings, we will only do so by adhering to sound lending principles applied in a prudent and consistent manner. Thus, we will not relax our underwriting standards in order to achieve designated growth goals. Table 4 SOURCES OF EARNING ASSET GROWTH 2006 to Percentage Components of 2007 Of Total Average Earning Assets (Average Balances – Dollars In Thousands) Change Change 2007 2006 2005 Loans: Commercial, Financial, and Agricultural (12,244) (16.0)% 9.5% 9.7% 9.5% Real Estate – Construction (15,711) (21.0)% 7.3% 7.8% 6.9% Real Estate – Commercial (29,417) (39.0)% 29.2% 29.5% 31.4% Real Estate – Residential (38,282) (51.0)% 31.5% 32.2% 31.3% Consumer 1,107 1.0% 11.2% 10.7% 10.9% Total Loans (94,547) (126.00)% 88.7% 89.9% 90.0% Investment Securities: Taxable (8,552) (12.0)% 4.8% 5.0% 6.5% Tax-Exempt 10,215 14.0% 3.8% 3.2% 2.3% Total Securities 1,663 2.0% 8.6% 8.2% 8.8% Funds Sold 18,135 24.0% 2.7% 1.9% 1.2% Total Earning Assets $ (74,749) 100.0% 100.0% 100.0% 100.0%

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Our average loan-to-deposit ratio decreased to 97.2% in 2007 from 99.7% in 2006. This compares to an average loan-to-deposit ratio in 2005 of 100.7%. The lower loan-to-deposit ratios reflect declining loan balances, which until the fourth quarter of 2007, have declined for seven straight quarters. The composition of our loan portfolio at December 31, for each of the past five years is shown in Table 5. Table 6 arrays our total loan portfolio as of December 31, 2007, based upon maturities. As a percent of the total portfolio, loans with fixed interest rates represent 36.4% as of December 31, 2007, versus 35.7% at December 31, 2006. Table 5 LOANS BY CATEGORY As of December 31, (Dollars in Thousands) 2007 2006 2005 2004 2003 Commercial, Financial and Agricultural $ 208,864 $ 229,327 $ 218,434 $ 206,474 $ 160,048 Real Estate - Construction 142,248 179,072 160,914 140,190 89,149 Real Estate - Commercial 634,920 643,885 718,741 655,426 391,250 Real Estate - Residential 680,800 709,735 723,336 600,375 467,790 Consumer 249,018 237,702 246,069 226,360 233,395

Total Loans, Net of Unearned Interest $ 1,915,850 $ 1,999,721 $ 2,067,494 $ 1,828,825 $ 1,341,632

Table 6 LOAN MATURITIES Maturity Periods

(Dollars in Thousands) One Year

or Less

Over One Through

Five Years

Over Five

Years Total Commercial, Financial and Agricultural $ 83,469 $ 93,283 $ 32,112 $ 208,864 Real Estate 377,077 224,994 855,897 1,457,968 Consumer(1) 31,134 208,611 9,273 249,018 Total $ 491,680 $ 526,888 $ 897,282 $ 1,915,850

Loans with Fixed Rates $ 321,011 $ 346,198 $ 31,206 $ 698,415 Loans with Floating or Adjustable Rates 170,669 180,690 866,076 1,217,435

Total $ 491,680 $ 526,888 $ 897,282 $ 1,915,850 (1) Demand loans and overdrafts are reported in the category of one year or less.

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Allowance for Loan Losses Management believes it maintains the allowance for loan losses at a level sufficient to provide for the estimated credit losses inherent in the loan portfolio as of the balance sheet date. Credit losses arise from the borrowers’ inability or unwillingness to repay, and from other risks inherent in the lending process including collateral risk, operations risk, concentration risk, and economic risk. As such, all related risks of lending are considered when assessing the adequacy of the allowance. The allowance for loan losses is established through a provision charged to expense. Loans are charged against the allowance when management believes collection of the principal is unlikely. The allowance for loan losses is based on management's judgment of overall credit quality. This is a significant estimate based on a detailed analysis of the loan portfolio. The balance can and will change based on changes in the assessment of the portfolio's overall credit quality and other risk factors both internal and external to us. Management evaluates the adequacy of the allowance for loan losses on a quarterly basis. Loans that have been identified as impaired are reviewed for adequacy of collateral, with a specific reserve assigned to those loans when necessary. A loan is deemed impaired when, based on current information and events, it is probable that the company will not be able to collect all amounts due (principal and interest payments), according to the contractual terms of the loan agreement. All loan relationships that exceed $100,000 are reviewed for impairment. The evaluation is based on current financial condition of the borrower or current payment status of the loan. The method used to assign a specific reserve depends on whether repayment of the loan is dependent on liquidation of collateral. If repayment is dependent on the sale of collateral, the reserve is equivalent to the recorded investment in the loan less the fair value of the collateral after estimated sales expenses. If repayment is not dependent on the sale of collateral, the reserve is equivalent to the recorded investment in the loan less the estimated cash flows discounted using the loan’s effective interest rate. The discounted value of the cash flows is based on the anticipated timing of the receipt of cash payments from the borrower. The reserve allocations assigned to impaired loans are sensitive to the extent market conditions or the actual timing of cash receipts change. Once specific reserves have been assigned to impaired loans, general reserves are assigned to the remaining portfolio. General reserves are assigned to various homogenous loan pools, including commercial, commercial real estate, construction, residential 1-4 family, home equity, and consumer. General reserves are assigned based on historical loan loss ratios (by pool) and are adjusted for various internal and external environmental factors unique to each loan pool. The allowance for loan losses is compared against the sum of the specific reserves assigned to impaired loans plus the general reserves assigned to the remaining portfolio. The unallocated portion of the allowance is monitored on a regular basis and adjusted based on management’s determination of estimation risk. Table 7 analyzes the activity in the allowance over the past five years. The allowance for loan losses was $18.1 million at December 31, 2007 and $17.2 million at December 31, 2006. As a percent of total loans (net of overdrafts), the allowance was 0.95% in 2007 and 0.86% in 2006. The allowance for loan losses reflects management’s current estimate of the credit quality of our loan portfolio. While there can be no assurance that we will not sustain loan losses in a particular period that are substantial in relation to the size of the allowance, management’s assessment of the loan portfolio does not indicate a likelihood of this occurrence. It is management’s opinion that the allowance at December 31, 2007 is adequate to absorb losses inherent in the loan portfolio at year-end. Table 8 provides an allocation of the allowance for loan losses to specific loan types for each of the past five years. The reserve allocations, as calculated using the above methodology, are assigned to specific loan categories corresponding to the type represented within the components discussed. There was a significant change in the reserve allocation in 2004 as noted by reserves held for the consumer loan, commercial real estate, and commercial portfolios. The Bank's credit card portfolio, which previously accounted for up to one-third of net loan losses annually, was sold in August 2004, thus reducing the reserves required to support consumer loans. The large increase in 2004 for reserves held for commercial real estate and commercial loans was due to the acquisition of loans from Farmers and Merchants Bank of Dublin in late 2004. Additionally, First National Bank of Alachua was acquired during 2005, which pushed total reserves higher.

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Table 7 ANALYSIS OF ALLOWANCE FOR LOAN LOSSES For the Years Ended December 31, (Dollars in Thousands) 2007 2006 2005 2004 2003 Balance at Beginning of Year $ 17,217 $ 17,410 $ 16,037 $ 12,429 $ 12,495 Acquired Reserves - - 1,385 5,713 - Reserve Reversal(1) - - - (800) - Charge-Offs:

Commercial, Financial and Agricultural 1,462 841 1,287 873 426 Real Estate - Construction 166 - - - - Real Estate - Commercial 709 346 255 48 91 Real Estate - Residential 1,429 280 321 191 228 Consumer 3,451 2,516 2,380 3,946 3,794

Total Charge-Offs 7,217 3,983 4,243 5,058 4,539 Recoveries:

Commercial, Financial and Agricultural 174 246 180 81 142 Real Estate - Construction - - - - - Real Estate - Commercial 14 17 3 14 - Real Estate - Residential 36 11 37 188 18 Consumer 1,679 1,557 1,504 1,329 877

Total Recoveries 1,903 1,831 1,724 1,612 1,037 Net Charge-Offs 5,314 2,152 2,519 3,446 3,502 Provision for Loan Losses 6,163 1,959 2,507 2,141 3,436 Balance at End of Year $ 18,066 $ 17,217 $ 17,410 $ 16,037 $ 12,429

Ratio of Net Charge-Offs to Average Loans

Outstanding .27% .11% .13 % .22% .27%

Allowance for Loan Losses as a Percent of Loans at

End of Year .94% .86% .84 % .88% .93%

Allowance for Loan Losses as a Multiple of Net

Charge-Offs 3.40x 8.00x 6.91x 4.65x 3.55x

(1) Reflects recapture of reserves allocated to the credit card portfolio sold in August 2004.

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Table 8 ALLOCATION OF ALLOWANCE FOR LOAN LOSSES 2007 2006 2005 2004 2003

(Dollars in Thousands)

Allowance Amount

Percent of Loans in Each

Category To Total

Loans Allowance

Amount


CategoryTo Total

Loans Allowance

Amount


Category To Total

Loans Allowance

Amount


Category To Total

Loans Allowance

Amount

Percent of Loansin Each

CategoryTo Total

Loans Commercial, Financial and

Agricultural $ $3,106 10.9%

$ 3,900 11.5% $ 3,663 10.6% $ 4,341 11.3% $ 2,824 11.9%

Real Estate: Construction 3,117 7.4 745 9.0 762 7.8 578 7.7 313 6.6 Commercial 4,372 33.1 5,996 32.2 6,352 34.7 6,296 35.8 2,831 29.2 Residential 3,733 35.6 1,050 35.5 1,019 35.0 705 32.8 853 34.9

Consumer 2,790 13.0 3,081 11.8 3,105 11.9 2,966 12.4 4,169 17.4 Not Allocated 948 - 2,445 - 2,509 - 1,151 - 1,439 -

Total $ $18,066 100.0% $ 17,217 100.0% $ 17,410 100.0% $ 16,037 100.0% $ 12,429 100.0%

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Risk Element Assets Risk element assets consist of nonaccrual loans, renegotiated loans, other real estate, loans past due 90 days or more, potential problem loans and loan concentrations. Table 9 depicts certain categories of our risk element assets as of December 31 for each of the last five years. We discuss potential problem loans and loan concentrations within the narrative portion of this section. Our nonperforming loans increased $17.1 million, or 212%, from a level of $8.0 million at December 31, 2006. During 2007, we added loans totaling approximately $39.8 million to non-accruing status, while removing loans totaling $22.7 million. Of the $22.7 million removed, $2.3 million consisted of principal reductions and loan payoffs, $4.6 million represented loans transferred to other real estate, $14.3 million consisted of loans brought current and returned to an accrual status, and $1.5 million was charged off. The increase in nonaccrual loans is partly attributable to the addition of three large loan relationships to nonaccrual status during the fourth quarter of 2007. Two of the aforementioned loans totaling $4.8 million are to borrowers employed in the real estate market and the other loan relationship totaling $5.9 million consists of loans to a commercial business. The make-up of nonaccrual loans (by loan type) at year-end was as follows (in millions): commercial - $0.6, construction - $6.5, commercial real estate - $11.4, and residential real estate - $6.6. Management has allocated specific reserves to absorb anticipated losses on these nonperforming loans. We review loans for potential impairment on a quarterly basis. A loan is deemed impaired when, based on current information and events, it is probable that the company will not be able to collect all amounts due (principal and interest payments), according to the contractual terms of the loan agreement. When a loan is considered impaired, we review our exposure to credit loss. If credit loss is probable, a specific reserve is allocated to absorb the anticipated loss. We had $36.6 million in loans considered impaired at December 31, 2007. We have established specific reserves for these loans in the amount of $4.7 million. Table 9 RISK ELEMENT ASSETS As of December 31, (Dollars in Thousands) 2007 2006 2005 2004 2003 Nonaccruing Loans $ 25,119 $ 8,042 $ 5,258 $ 4,646 $ 2,346 Restructured - - - - -

Total Nonperforming Loans 25,119 8,042 5,258 4,646 2,346 Other Real Estate Owned 3,043 689 292 625 4,955

Total Nonperforming Assets $ 28,162 $ 8,731 $ 5,550 $ 5,271 $ 7,301

Past Due 90 Days or More 416 135 309 $ 605 $ 328

Nonperforming Loans/Loans 1.31% .40% .25% .25% .17%

Nonperforming Assets/Loans Plus Other Real Estate 1.47% .44% .27% .29% .54%

Nonperforming Assets/Capital(1) 9.06% 2.62% 1.72% 1.93% 3.39%

Allowance/Nonperforming Loans 71.92% 214.09% 331.11% 345.18% 529.80%

(1) For computation of this percentage, "Capital" refers to shareowners' equity plus the allowance for loan losses. We recognize interest on non-accrual loans only when payments are received. We apply cash payments collected on non-accrual loans against the principal balance or recognize it as interest income based upon management’s expectations as to the ultimate collectability of principal and interest in full. If interest on non-accruing loans had been recognized on a fully accruing basis, we would have recorded an additional $922,000 of interest income for the year ended December 31, 2007. Other real estate totaled $3.0 million at December 31, 2007, versus $689,000 at December 31, 2006. This category includes property owned by the Bank that was acquired either through foreclosure procedures or by receiving a deed in lieu of foreclosure. During 2007, we added properties totaling $3.5 million, and partially or completely liquidated properties totaling $1.1 million, resulting in a net increase in other real estate of approximately $2.4 million. Potential problem loans are defined as those loans which are now current but where management has doubt as to the borrower’s ability to comply with present loan repayment terms. Potential problem loans totaled $10.2 million at December 31, 2007, compared to $11.8 million at year-end 2006. Loans past due 90 days or more and still on accrual status totaled $416,000 at year-end, up from $135,000 at the previous year-end.

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Loan concentrations are considered to exist when there are amounts loaned to a multiple number of borrowers engaged in similar activities which cause them to be similarly impacted by economic or other conditions and such amount exceeds 10% of total loans. Due to the lack of diversified industry within the markets served by the Bank and the relatively close proximity of the markets, we have both geographic concentrations as well as concentrations in the types of loans funded. Specifically, due to the nature of our markets, a significant portion of the portfolio has historically been secured with real estate. While we have a majority of our loans (76.1%) secured by real estate, the primary types of real estate collateral are commercial properties and 1-4 family residential properties. At December 31, 2007, commercial real estate mortgage loans and residential real estate mortgage loans accounted for 33.1% and 35.5%, respectively, of the loan portfolio. Our real estate loan portfolio, while subject to cyclical pressures, is not unusually speculative in nature and is originated at amounts that are within or exceed regulatory guidelines for collateral values. Management anticipates no significant reduction in the percentage of real estate loans to total loans outstanding. Management is continually analyzing its loan portfolio in an effort to identify and resolve problem assets as quickly and efficiently as possible. As of December 31, 2007, management believes it has identified and adequately reserved for such problem assets. However, management recognizes that many factors can adversely impact various segments of our markets, creating financial difficulties for certain borrowers. As such, management continues to focus its attention on promptly identifying and providing for potential losses as they arise. Investment Securities In 2007, our average investment portfolio increased $1.7 million, or 0.9%, from 2006 and decreased $4.6 million, or 2.4%, from 2005 to 2006. As a percentage of average earning assets, the investment portfolio represented 8.6% in 2007, compared to 8.3% in 2006. In 2007, the increase in the average balance of the investment portfolio was primarily due to the reinvestment of a portion of the interest earned on these investments. In 2006, the decline in the average balance of the investment portfolio was primarily due to the timing of reinvesting maturities. In 2008, we will closely monitor liquidity levels to assess the need to purchase additional investments. In 2007, average taxable investments decreased $8.6 million, or 7.6%, while tax-exempt investments increased $10.2 million, or 13.7%. We changed the mix because tax-exempt securities offered a more attractive spread compared to taxable securities during the year. Management will continue to purchase "bank qualified" municipal issues when it considers the yield to be attractive and we can do so without adversely impacting our tax position. As of December 31, 2007, we have the ability to purchase additional tax-exempt securities without adverse tax consequences. The investment portfolio is a significant component of our operations and, as such, it functions as a key element of liquidity and asset/liability management. As of December 31, 2007, all securities are classified as available-for-sale. The classification of securities as available-for-sale offers management full flexibility in managing our liquidity and interest rate sensitivity without adversely impacting our regulatory capital levels. Securities in the available-for-sale portfolio are recorded at fair value with unrealized gains and losses associated with these securities recorded net of tax, in the accumulated other comprehensive loss component of shareowners' equity. At December 31, 2007, shareowners' equity included a net unrealized gain in the investment portfolio of $0.4 million, compared to a net unrealized loss of $0.8 million at December 31, 2006. It is neither management's intent nor practice to participate in the trading of investment securities for the purpose of recognizing gains and therefore we do not maintain a trading portfolio. The average maturity of the total portfolio at December 31, 2007 and 2006 was 1.63 and 1.75 years, respectively. See Table 10 for a breakdown of maturities by investment type. The weighted average taxable equivalent yield of the investment portfolio at December 31, 2007 was 5.08%, versus 4.72% in 2006. The higher rates for the first three quarters allowed purchases of securities with yields higher than those of maturing bonds. The fed rate cuts will have an unfavorable impact on investment income in 2008. The quality of the municipal portfolio at year-end is depicted on page 41. There were no investments in obligations, other than U.S. Governments, of any one state, municipality, political subdivision or any other issuer that exceeded 10% of our shareowners' equity at December 31, 2007. Due diligence is continually performed on the investment portfolio, namely the municipal bonds. Special attention is given to municipal bond insurers to ensure diversification, and the strength of the bonds’ underlying rating is being considered in any new purchases. Our mortgage bank security portfolio is high quality and has no subprime market exposure. Table 10 and Note 2 in the Notes to Consolidated Financial Statements present a detailed analysis of our investment securities as to type, maturity and yield.

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Table 10 MATURITY DISTRIBUTION OF INVESTMENT SECURITIES As of December 31, 2007 2006 2005

(Dollars in Thousands) Amortized

Cost Market Value

Weighted(1) Average

Yield Amortized

Cost Market Value

Weighted(1) Average

Yield Amortized

Cost Market Value

Weighted(1) Average

Yield U.S. GOVERNMENTS

Due in 1 year or less $ 36,441 $ 36,570 4.62% $ 17,329 $ 17,150 3.45% $ 58,032 $ 57,621 2.30% Due over 1 year through 5 years 25,264 25,493 4.46 56,388 55,978 4.64 24,296 23,662 3.52 Due over 5 years through 10 years - - - - - - 1,970 1,948 3.57 Due over 10 years - - - - - - - - -

TOTAL 61,705 62,063 4.56% 73,717 73,128 4.36 84,298 83,231 2.68 STATES & POLITICAL SUBDIVISIONS

Due in 1 year or less 25,675 25,697 5.19 31,438 31,300 4.21 21,097 21,048 4.66 Due over 1 year through 5 years 64,339 64,304 5.38 52,183 51,922 5.25 32,130 31,702 4.11 Due over 5 years through 10 years - - - - - - 384 393 6.53 Due over 10 years - - - - - - - - -

TOTAL 90,014 90,001 5.32% 83,621 83,222 4.86 53,611 53,143 4.34 MORTGAGE-BACKED SECURITIES(2)

Due in 1 year or less 4,125 4,117 4.23 3,568 3,571 5.37 339 337 3.97 Due over 1 year through 5 years 15,043 15,070 4.89 14,942 14,732 4.58 14,958 14,685 4.12 Due over 5 years through 10 years 7,166 7,100 5.21 4,734 4,593 5.02 5,651 5,509 5.09 Due over 10 years - - - - - - - - -

TOTAL 26,334 26,287 4.87% 23,244 22,896 4.79 20,948 20,531 4.38 OTHER SECURITIES

Due in 1 year or less - - - - - - - - - Due over 1 year through 5 years - - - - - - - - - Due over 5 years through 10 years 1,000 1,061 5.00 - - - - - - Due over 10 years(3) 11,307 11,307 5.90 12,648 12,648 5.78 14,114 14,114 4.75

TOTAL 12,307 12,368 5.90 12,648 12,648 5.78 14,114 14,114 4.75 TOTAL INVESTMENT SECURITIES $ 190,360 $ 190,719 5.08% $ 193,230 $ 191,894 4.72% $ 172,971 $ 171,019 3.57%

(1) Weighted average yields are calculated on the basis of the amortized cost of the security. The weighted average yields on tax-exempt obligations are computed on a taxable equivalent basis using a 35% tax rate. (2) Based on weighted average life. (3) Federal Home Loan Bank Stock and Federal Reserve Bank Stock are included in this category for weighted average yield, but do not have stated maturities.

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AVERAGE MATURITY

As of December 31, (In Years) 2007 2006 2005 U.S. Governments 1.09 1.76 1.01 States and Political Subdivisions 1.48 1.39 1.31 Mortgage-Backed Securities 3.47 3.05 5.05 Other Securities - - - TOTAL 1.63 1.75 1.65

MUNICIPAL PORTFOLIO QUALITY (Dollars in Thousands)

Moody's Rating Amortized Cost Percentage AAA $ 84,041 93.36%AA-1 - - AA-2 - - AA-3 - - AA - - Not Rated(1) 5,973 6.64

Total $ 90,014 100.00%

(1) All of the securities not rated by Moody's are rated "AA" or higher by S&P. Deposits and Funds Purchased In 2007, average total deposits of $1.99 billion decreased $44.5 million, or 2.2%, over the comparable year. Our noninterest bearing deposits and certificates of deposit declined $62.9 million and $32.5 million, respectively. Savings balances declined by $14.3 million from the prior year. Average noninterest bearing deposits as a percent of average total deposits declined from 24.8% in 2006 to 22.2% in 2007, which is partially attributable to the natural disintermediation that occurs in a higher rate environment as clients seek higher yielding deposit products. The decrease in certificates of deposit reflects management’s strategy to manage the overall mix of deposits and not compete with higher rate paying competitors for this funding source unless the relationship is profitable and warrants retention. Partially offsetting the declines above were increases in NOW and money market deposits reflecting growth in our interest bearing “Absolutely Free” checking accounts and our negotiated rate deposit products. Compared to the linked third quarter of 2007, average deposits increased $62.6 million, or 3.2% due to a significant increase in the level of public funds, a portion of which is attributable to normal seasonal activity, while the balance is due to changing market conditions. During the fourth quarter, several local government entities, which are clients, transferred significant balances from the State Board of Administration's Local Government Investment Pool to the Bank. These balances are reflected in our NOW account deposits, which increased, based on monthly averages, from $521 million in September to $719 million in December. While this growth added to our net interest income, public funds are generally higher cost deposits, which drove our average cost of funds up and thereby lowered our net interest margin percentage for the quarter. Although these deposits are higher rate negotiated deposits, the changing market conditions offer an excellent opportunity to further cultivate these relationships and take advantage of both lending and asset management opportunities. As is normal with seasonal deposits, management expects deposit levels to decline during the first quarter of 2008. Table 2 provides an analysis of our average deposits, by category, and average rates paid thereon for each of the last three years. Table 11 reflects the shift in our deposit mix over the last three years and Table 12 provides a maturity distribution of time deposits in denominations of $100,000 and over. Average short-term borrowings, which include federal funds purchased, securities sold under agreements to repurchase, Federal Home Loan Bank advances (maturing in less than one year), and other borrowings, decreased $12.3 million, or 15.6%. The decrease is attributable to a $15.8 million decrease in other borrowings primarily attributable to maturities of FHLB advances, and a $0.8 million decrease in funds purchased, partially offset by a $4.3 million increase in repurchase agreements. See Note 8 in the Notes to Consolidated Financial Statements for further information on short-term borrowings.

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Table 11 SOURCES OF DEPOSIT GROWTH 2006 to Percentage Components of 2007 of Total Total Deposits (Average Balances - Dollars in Thousands) Change Change 2007 2006 2005 Noninterest Bearing Deposits $ (62,922) (141.4) % 22.2 % 24.8 % 27.9 %NOW Accounts 38,389 86.3 28.0 25.5 22.0 Money Market Accounts 26,936 60.6 20.0 18.2 14.1 Savings (14,333) (32.2) 6.0 6.6 7.8 Time Deposits (32,555) (73.2) 23.9 24.9 28.2

Total Deposits $ (44,485) 100.0 % 100.0 % 100.0 % 100.0 %

Table 12 MATURITY DISTRIBUTION OF CERTIFICATES OF DEPOSIT $100,000 OR OVER December 31, 2007 (Dollars in Thousands) Time Certificates of Deposit Percent Three months or less $ 34,043 26.24 % Over three through six months 31,235 24.07 Over six through twelve months 52,823 40.71 Over twelve months 11,656 8.98

Total $ 129,757 100.00 %

LIQUIDITY AND CAPITAL RESOURCES Liquidity Liquidity for a banking institution is the availability of funds to meet increased loan demand and excessive deposit withdrawals. Management monitors our financial position in an effort to ensure we have ready access to sufficient liquid funds to meet normal transaction requirements, can take advantage of investment opportunities, and cover unforeseen liquidity demands. In addition to core deposit growth, sources of funds available to meet liquidity demands include cash received through ordinary business activities (e.g., collection of interest and fees), federal funds sold, loan and investment maturities, our bank lines of credit, approved lines for the purchase of federal funds by CCB, and Federal Home Loan Bank advances. We ended 2007 with $166.6 million in liquidity, an increase of $87.5 million from the previous year-end. On a year-to-date average basis, liquidity increased $18.1 million from 2006. The increase in average liquidity was primarily the result of the decline in loans partially offset by the decline in deposits and the repurchase of $43 million in our common stock during the year. The higher level of liquidity at year-end was a result of the aforementioned deposit growth experienced during the fourth quarter of 2007. Borrowings At December 31, 2007, we had $38.7 million in borrowings outstanding to the Federal Home Loan Bank of Atlanta ("FHLB") consisting of 32 notes. Seven notes totaling $12.2 million are classified as short-term borrowings with the remaining notes classified as long-term borrowings with maturities ranging from 2009 to 2023. The interest rates are fixed and the weighted average rate at December 31, 2007 was 4.70%. Required cash payments (including principal reductions and maturities) for the FHLB advances are detailed in Table 13. Approximately $28.6 million of the aforementioned FHLB debt is related to match-term funding for loans originated by the Bank. During 2007, we obtained one advance from the FHLB for $1.7 million with a fixed rate of 5.31% and maturing in 2014. The FHLB notes are collateralized by a blanket floating lien on all 1-4 family residential mortgage loans, commercial real estate mortgage loans, and home equity mortgage loans. See Note 9 in the Notes to Consolidated Financial Statements for additional information on these borrowings.

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Table 13 CONTRACTUAL CASH OBLIGATIONS Table 13 sets forth certain information about contractual cash obligations at December 31, 2007. Payments Due By Period (Dollars in Thousands) < 1 Yr 1 – 3 Yrs 3 – 5 Yrs > 5 Years Total Federal Home Loan Bank Advances $ 14,604 $ 5,493 $ 5,157 $ 13,403 $ 38,657 Subordinated Notes Payable - - - 62,887 62,887 Operating Lease Obligations 1,425 2,318 1,398 5,700 10,841 Time Deposit Maturities 408,041 57,101 2,231 - 467,373Liability for Unrecognized Tax Benefits 95 179 1,502 2,031 3,807Total Contractual Cash Obligations $ 424,165 $ 65,091 $ 10,288 $ 84,021 $ 583,565

We issued two junior subordinated deferrable interest notes to wholly owned Delaware statutory trusts. The first note for $30.9 million was issued to CCBG Capital Trust I in November 2004. The second note for $32.0 million was issued to CCBG Capital Trust II in May 2005. See Note 9 in the Notes to Consolidated Financial Statements for additional information on these borrowings. The interest payments for the CCBG Capital Trust I borrowing are due quarterly at a fixed rate of 5.71% for five years, then adjustable annually to LIBOR plus a margin of 1.90%. This note matures on December 31, 2034. The proceeds of this borrowing were used to partially fund the Farmers and Merchants Bank of Dublin acquisition in 2004. The interest payments for the CCBG Capital Trust II borrowing are due quarterly at a fixed rate of 6.07% for five years, then adjustable quarterly to LIBOR plus a margin of 1.80%. This note matures on June 15, 2035. The proceeds of this borrowing were used to partially fund the First National Bank of Alachua acquisition in 2005. We anticipate that our capital expenditures will approximate $20.0 million over the next twelve months. These capital expenditures are expected to consist primarily of new office construction, office equipment and furniture, and technology purchases. Management believes that these capital expenditures can be funded with existing resources internally without impairing our ability to meet our on-going obligations. Capital We continue to maintain a strong capital position. The ratio of shareowners' equity to total assets at year-end was 11.19%, 12.15%, and 11.65%, in 2007, 2006, and 2005, respectively. Management believes its strong capital base not only offers protection against adverse developments that may arise during the course of an economic downturn, but it also places the company in a position to take advantage of opportunities that arise, including investments, acquisitions, and/or stock purchases. We are subject to risk-based capital guidelines that measure capital relative to risk weighted assets and off-balance sheet financial instruments. Capital guidelines issued by the Federal Reserve Board require bank holding companies to have a minimum total risk-based capital ratio of 8.00%, with at least half of the total capital in the form of Tier I Capital. As of December 31, 2007, we exceeded these capital guidelines with a total risk-based capital ratio of 14.05% and a Tier 1 ratio of 13.05%, compared to 14.95% and 14.00%, respectively, in 2006. As allowed by Federal Reserve Board capital guidelines the trust preferred securities issued by CCBG Capital Trust I and CCBG Capital Trust II are included as Tier I Capital in our capital calculations previously noted. See Note 9 in the Notes to Consolidated Financial Statements for additional information on our two trust preferred security offerings. See Note 14 in the Notes to Consolidated Financial Statements for additional information as to our capital adequacy. A tangible leverage ratio is also used in connection with the risk-based capital standards and is defined as Tier I Capital divided by average assets. The minimum leverage ratio under this standard is 3% for the highest-rated bank holding companies which are not undertaking significant expansion programs. An additional 1% to 2% may be required for other companies, depending upon their regulatory ratings and expansion plans. On December 31, 2007, we had a leverage ratio of 10.41% compared to 11.30% in 2006. The slight decreases in capital ratios at December 31, 2007 reflect both balance sheet growth and the repurchase of $43.0 million in CCBG common stock during 2007. Shareowners' equity as of December 31, for each of the last three years is presented below: (Dollars in Thousands) 2007 2006 2005 Common Stock 172 185 186 Additional Paid-in Capital 38,243 80,654 83,304 Retained Earnings 260,325 243,242 223,532

Subtotal 298,740 324,081 307,022 Accumulated Other Comprehensive (Loss), Net of Tax (6,065) (8,311) (1,246) Total Shareowners' Equity $ 292,675 $ 315,770 $ 305,776

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At December 31, 2007, our common stock had a book value of $17.03 per diluted share compared to $17.01 in 2006. Book value is impacted by the net unrealized gains and losses on investment securities available-for-sale. At December 31, 2007, the net unrealized gain was $.4 million compared to a net unrealized loss of $.8 million in 2006. Beginning in 2006, book value has been impacted by the recording of our unfunded pension liability through other comprehensive income in accordance with SFAS 158. At December 31, 2007, the net pension liability reflected in other comprehensive income was $6.3 million compared to $7.5 million at December 31, 2006. Our Board of Directors has authorized the repurchase of up to 2,671,875 shares of our outstanding common stock. The purchases are made in the open market or in privately negotiated transactions. Through December 31, 2007, we have repurchased a total of 2,284,201 shares at an average purchase price of $26.05 per share. During 2007, we repurchased 1,404,364 shares at an average purchase price of $30.75. We offer an Associate Incentive Plan under which certain associates are eligible to earn shares of our common stock based upon achieving established performance goals. In 2007, we issued 32,799 shares, valued at approximately $1.2 million under this plan related to the 2006 financial performance goal. No shares were earned under this plan in 2007. We also offer stock purchase plans, which permit our associates and directors to purchase shares at a 10% discount. In 2007, 35,659 shares, valued at approximately $1.1 million (before 10% discount), were issued under these plans. Dividends Adequate capital and financial strength is paramount to our stability and the stability of our subsidiary bank. Cash dividends declared and paid should not place unnecessary strain on our capital levels. When determining the level of dividends the following factors are considered:

Compliance with state and federal laws and regulations; Our capital position and our ability to meet our financial obligations; Projected earnings and asset levels; and The ability of the Bank and us to fund dividends.

Although we believe a consistent dividend payment is favorably viewed by the financial markets and our shareowners, our Board of Directors will declare dividends only if we are considered to have adequate capital. Future capital requirements and corporate plans are considered when the Board considers a dividend payment. Dividends declared and paid totaled $.7100 per share in 2007. For the first through the third quarters of 2007 we declared and paid a dividend of $.1750 per share. The dividend was raised 5.7% in the fourth quarter of 2007 from $.1750 per share to $.1850 per share. We paid dividends of $.6625 per share in 2006 and $.6185 per share in 2005. The dividend payout ratio was 42.77%, 37.01%, and 37.35% for 2007, 2006 and 2005, respectively. Total cash dividends declared per share in 2007 represented a 4.1% increase over 2006. All share and per share data has been adjusted to reflect the five-for-four stock split effective July 1, 2005. OFF-BALANCE SHEET ARRANGEMENTS We do not currently engage in the use of derivative instruments to hedge interest rate risks. However, we are a party to financial instruments with off-balance sheet risks in the normal course of business to meet the financing needs of our clients. At December 31, 2007, we had $437.8 million in commitments to extend credit and $17.4 million in standby letters of credit. Commitments to extend credit are agreements to lend to a client so long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Standby letters of credit are conditional commitments issued by us to guarantee the performance of a client to a third party. We use the same credit policies in establishing commitments and issuing letters of credit as we do for on-balance sheet instruments. If commitments arising from these financial instruments continue to require funding at historical levels, management does not anticipate that such funding will adversely impact our ability to meet on-going obligations. In the event these commitments require funding in excess of historical levels, management believes current liquidity, available advances from the FHLB and investment security maturities provide a sufficient source of funds to meet these commitments.

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Fourth Quarter, 2007 Financial Results For the fourth quarter, earnings totaled $7.7 million, or $.44 per diluted share compared to $7.2 million, or $.41 per diluted share, in the previous quarter. A favorable variance in operating revenues of $1.0 million was partially offset by unfavorable variances in the loan loss provision of $147,000 and noninterest expense of $1.7 million. The increase in operating revenues reflects higher noninterest income of $1.4 million, partially offset by lower net interest income of $365,000, while the increase in operating expenses reflects the recognition of a $1.9 million litigation reserve associated with our membership in Visa U.S.A. We also trued-up our deferred tax liabilities which favorably impacted tax expense by $937,000 in the fourth quarter. For the fourth quarter, tax equivalent net interest income decreased $321,000, or 1.1%, compared to the previous quarter driven primarily by the loss of interest income associated with a higher level of non-performing assets. The net interest margin decreased 17 basis points to 5.10% for the quarter reflecting a higher level of nonperforming assets and a shift in the mix of our interest bearing deposits. The earning asset yield declined 25 basis points to 7.50% due primarily to a 20 basis point decline in the loan yield and a 75 basis point reduction in the yield on short-term (over-night) investments, reflecting rate reductions by the Federal Reserve totaling 100 basis points between September 18th and December 11th; and an increasing level of nonperforming assets during the quarter. Approximately 6 basis points of the 25 basis point reduction in yield are attributable to a higher level of non-performing assets. The average cost of funds declined eight basis points reflecting a reduction of average rates paid in response to the Federal Reserve’s rate cuts; however, a significant portion of this benefit was offset by the influx of higher costs public funds as noted below. The provision for loan losses increased $147,000 over the third quarter to $1.7 million. The reserve as a percentage of total loans (net of overdrafts) was .95% at both the end of the fourth quarter and third quarter. For the fourth quarter, net charge-offs totaled $1.6 million, or .34% of average loans compared to $1.0 million, or .21% for previous quarter with consumer loans accounting for $486,000, or 88% of the increase. Noninterest income for the fourth quarter of $15.8 million was $1.4 million, or 9.6% higher than the previous quarter. Higher deposit service fees ($870,000), data processing fees ($77,000), and bankcard fees ($105,000) drove the improvement for the quarter. Miscellaneous income also increased for the quarter driven by gains realized on the sale of a banking office ($540,000) and the sale of shares of Mastercard ($149,000). These favorable variances were partially offset by a reduction in mortgage banking revenues ($217,000) and asset management fees ($100,000). Noninterest expense for the fourth quarter increased $1.7 million, or 5.7% over the prior quarter due to a contingency loss accrual in the amount of $1.9 million ($1.2 million after-tax or $.07 per share) related to the company’s membership in the Visa U.S.A. network. Excluding the impact of the aforementioned loss accrual and a variance in pension expense ($0.2 million in pension expense was recorded in the fourth quarter as compared to approximately $1.7 million per quarter in prior quarters), core operating expenses increased $1.3 million due primarily to higher salary expense ($587,000) and advertising expense ($275,000). Salary expense increased due to the true-up of performance based incentive accruals, slightly higher base salary expense, and a lower credit offset to salary expense from FASB 91 loan cost. The increase in advertising expense is due to an increase in Absolutely-Free Checking advertising costs driven by the addition of a new office, and a planned brand recognition advertising campaign that began in the second half of the year. For the quarter, earning assets averaged $2.191 billion, up from $2.145 billion in the third quarter. The increase is primarily attributable to an increase in deposits, which is discussed in more detail below. Average loans for the fourth quarter increased $0.8 million to $1.908 billion, which represents the first quarterly increase in two years. The increase in tax-free loans ($4.9 million) is a seasonal variation which typically decreases in the following quarter. At month-end December, nonperforming assets totaled $28.2 million compared to $14.1 million at the previous quarter-end. The level of non-accrual loans increased $12.7 million during the quarter to $25.1 million. There was a significant level of activity in the non-accrual loan category for the quarter, but a majority of the increase can be attributed to three large loan relationships totaling $10.7 million. Two of these loans totaling $4.8 million are to borrowers in the real estate market and the other loan relationship totaling $5.9 million consists of loans to a commercial business. Other real estate owned increased by $1.4 million. The nonperforming asset ratio and nonperforming loans coverage ratio were 1.47% and 71.9% at quarter-end compared to .74% and 145.5%, respectively, at the end of the third quarter reflecting a rising level of nonperforming loans during the quarter. Average deposits for the quarter increased $62.6 million, or 3.2% from the third quarter due primarily to an increase in NOW accounts ($82.6), partially offset by a reduction in DDA accounts ($16.1 million). On a period-end basis, negotiated NOW accounts increased $211 million, or 114%, from $185 million at the end of September to $396 million at the end of December. While a portion of the increase is normal seasonal activity, a majority of this increase reflects the movement from the State Board of Administration’s Local Government Investment Pool, which encountered issues regarding the quality of its investments and began to suffer large withdrawals and eventually had to freeze the fund on November 29, 2007. CCB has been a beneficiary of this movement of funds to banks. Generally, these are expensive deposits priced at a spread below the Fed funds rate. Although profitable, the margin on these deposits is thin. As noted above, this influx of higher cost deposits had a significant impact on our cost of funds and, therefore, our net interest margin percentage.

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ACCOUNTING POLICIES Critical Accounting Policies The consolidated financial statements and accompanying Notes to Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America, which require us to make various estimates and assumptions (see Note 1 in the Notes to Consolidated Financial Statements). We believe that, of our significant accounting policies, the following may involve a higher degree of judgment and complexity. Allowance for Loan Losses. The allowance for loan losses is established through a charge to the provision for loan losses. Provisions are made to reserve for estimated losses in loan balances. The allowance for loan losses is a significant estimate and we evaluate the allowance quarterly for adequacy. The use of different estimates or assumptions could produce a different required allowance, and thereby a larger or smaller provision recognized as expense in any given reporting period. A further discussion of the allowance for loan losses can be found in the section entitled "Allowance for Loan Losses" and Note 1 in the Notes to Consolidated Financial Statements. Intangible Assets. Intangible assets consist primarily of goodwill, core deposit assets, and other identifiable intangibles that were recognized in connection with various acquisitions. Goodwill represents the excess of the cost of acquired businesses over the fair market value of their identifiable net assets. We perform an impairment review on an annual basis to determine if there has been impairment of our goodwill. We have determined that no impairment existed at December 31, 2007. Impairment testing requires management to make significant judgments and estimates relating to the fair value of its reporting unit. Significant changes to these estimates may have a material impact on our reported results. Core deposit assets represent the premium we paid for core deposits. Core deposit intangibles are amortized on the straight-line method over various periods ranging from 5-10 years. Generally, core deposits refer to nonpublic, non-maturing deposits including noninterest-bearing deposits, NOW, money market and savings. We make certain estimates relating to the useful life of these assets, and rate of run-off based on the nature of the specific assets and the client bases acquired. If there is a reason to believe there has been a permanent loss in value, management will assess these assets for impairment. Any changes in the original estimates may materially affect reported earnings. Pension Assumptions. We have a defined benefit pension plan for the benefit of substantially all of our associates. Our funding policy with respect to the pension plan is to contribute amounts to the plan sufficient to meet minimum funding requirements as set by law. Pension expense, reflected in the Consolidated Statements of Income in noninterest expense as "Salaries and Associate Benefits," is determined by an external actuarial valuation based on assumptions that are evaluated annually as of December 31, the measurement date for the pension obligation. The Consolidated Statements of Financial Condition reflect an accrued pension benefit cost due to funding levels and unrecognized actuarial amounts. The most significant assumptions used in calculating the pension obligation are the weighted-average discount rate used to determine the present value of the pension obligation, the weighted-average expected long-term rate of return on plan assets, and the assumed rate of annual compensation increases. These assumptions are re-evaluated annually with the external actuaries, taking into consideration both current market conditions and anticipated long-term market conditions. The weighted-average discount rate is determined by matching the anticipated Retirement Plan cash flows to a long-term corporate Aa-rated bond index and solving for the underlying rate of return, which investing in such securities would generate. This methodology is applied consistently from year-to-year. The discount rate utilized in 2007 was 6.00%. The estimated impact to 2007 pension expense of a 25 basis point increase or decrease in the discount rate would have been a decrease of approximately $293,000 and an increase of approximately $306,000, respectively. We anticipate using a 6.25% discount rate in 2008. The weighted-average expected long-term rate of return on plan assets is determined based on the current and anticipated future mix of assets in the plan. The assets currently consist of equity securities, U.S. Government and Government agency debt securities, and other securities (typically temporary liquid funds awaiting investment). The weighted-average expected long-term rate of return on plan assets utilized for 2007 was 8.0%. The estimated impact to pension expense of a 25 basis point increase or decrease in the rate of return would have been an approximate $159,000 decrease or increase, respectively. We anticipate using a rate of return on plan assets for 2008 of 8.0%. The assumed rate of annual compensation increases of 5.50% in 2007 is based on expected trends in salaries and the employee base. This assumption is not expected to change materially in 2008. Detailed information on the pension plan, the actuarially determined disclosures, and the assumptions used are provided in Note 12 of the Notes to Consolidated Financial Statements.

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Recent Accounting Pronouncements Statement of Financial Accounting Standards (“SFAS”) SFAS No. 141, “Business Combinations (Revised 2007).” SFAS 141R replaces SFAS 141, “Business Combinations,” and applies to all transactions and other events in which one entity obtains control over one or more other businesses. SFAS 141R requires an acquirer, upon initially obtaining control of another entity, to recognize the assets, liabilities and any non-controlling interest in the acquiree at fair value as of the acquisition date. Contingent consideration is required to be recognized and measured at fair value on the date of acquisition rather than at a later date when the amount of that consideration may be determinable beyond a reasonable doubt. This fair value approach replaces the cost-allocation process required under SFAS 141 whereby the cost of an acquisition was allocated to the individual assets acquired and liabilities assumed based on their estimated fair value. SFAS 141R requires acquirers to expense acquisition-related costs as incurred rather than allocating such costs to the assets acquired and liabilities assumed, as was previously the case under SFAS 141. Under SFAS 141R, the requirements of SFAS 146, Accounting for Costs Associated with Exit or Disposal Activities,” would have to be met in order to accrue for a restructuring plan in purchase accounting. Pre-acquisition contingencies are to be recognized at fair value, unless it is a non-contractual contingency that is not likely to materialize, in which case, nothing should be recognized in purchase accounting and, instead, that contingency would be subject to the probable and estimable recognition criteria of SFAS 5, “Accounting for Contingencies.” SFAS 141R is effective for business combinations closing on or after January 1, 2009. We are in the process of reviewing the impact of SFAS 141R. SFAS No. 154, “Accounting Changes and Error Corrections, a Replacement of APB Opinion No. 20 and FASB Statement No. 3.” SFAS 154 establishes, unless impracticable, retrospective application as the required method for reporting a change in accounting principle in the absence of explicit transition requirements specific to a newly adopted accounting principle. Previously, most changes in accounting principle were recognized by including the cumulative effect of changing to the new accounting principle in net income of the period of the change. SFAS 154 carries forward the guidance in APB Opinion 20 “Accounting Changes,” requiring justification of a change in accounting principle on the basis of preferability. SFAS 154 also carries forward without change the guidance contained in APB Opinion 20, for reporting the correction of an error in previously issued financial statements and for a change in an accounting estimate. The adoption of SFAS 154 on January 1, 2006 did not significantly impact our financial statements. SFAS No. 157, "Fair Value Measurements." SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 is effective on January 1, 2008 and is not expected to have a significant impact on our financial statements. SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of Financial Accounting Standards Board (“FASB”) Statements No. 87, 88 106, and 132(R)." SFAS 158 requires an employer to recognize the over-funded or under-funded status of defined benefit postretirement plans as an asset or a liability in its statement of financial position. The funded status is measured as the difference between plan assets at fair value and the benefit obligation (the projected benefit obligation for pension plans or the accumulated benefit obligation for other postretirement benefit plans). An employer is also required to measure the funded status of a plan as of the date of its year-end statement of financial position with changes in the funded status recognized through comprehensive income. SFAS 158 also requires certain disclosures regarding the effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of gains or losses, prior service costs or credits, and the transition asset or obligation. We recognized the funded status of our defined benefit pension plan in our financial statements for the year ended December 31, 2006. SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities-Including an amendment of FASB Statement No. 115." SFAS 159 permits entities to choose to measure eligible items at fair value at specified election dates. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings at each subsequent reporting date. The fair value option (i) may be applied instrument by instrument, with certain exceptions, (ii) is irrevocable (unless a new election date occurs) and (iii) is applied only to entire instruments and not to portions of instruments. SFAS 159 is effective for us on January 1, 2008 and is not expected to have a significant impact on our financial statements. SFAS No. 160, “Noncontrolling Interest in Consolidated Financial Statements, an amendment of ARB Statement No. 51.” SFAS 160 amends Accounting Research Bulletin (ARB) No. 51, “Consolidated Financial Statements,” to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 clarifies that a non-controlling interest in a subsidiary, which is sometimes referred to as minority interest, is an ownership interest in the consolidated entity that should be reported as a component of equity in the consolidated financial statements. Among other requirements, SFAS 160 requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the non-controlling interest. It also requires disclosure, on the face of the consolidated income statement, of the amounts of consolidated net income attributable to the parent and to the non-controlling interest. SFAS 160 is effective on January 1, 2009 and is not expected to have a significant impact on our financial statements.

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Financial Accounting Standards Board Interpretations In July 2006, the FASB issued FIN 48 which defines the threshold for recognizing the benefits of tax return positions in the financial statements as "more-likely-than-not" to be sustained by the taxing authority. The recently issued literature also provides guidance on the derecognition, measurement and classification of income tax uncertainties, along with any related interest and penalties. FIN 48 also includes guidance concerning accounting for income tax uncertainties in interim periods and increases the level of disclosures associated with any recorded income tax uncertainties. The differences between the amounts recognized in the statements of financial position prior to the adoption of FIN 48 and the amounts reported after adoption will be accounted for as a cumulative-effect adjustment recorded to the beginning balance of retained earnings. FIN 48 became effective for us in the first quarter of 2007 and did not have a material impact on our financial statements. Emerging Issues Task Force In March 2007, the FASB ratified the consensus the Emerging Issues Task Force (“EITF”) reached regarding EITF Issue No. 06-10, “Accounting for Collateral Assignment Split-Dollar Life Insurance Arrangements” (“Issue 06-10”), which provides accounting guidance for postretirement benefits related to collateral assignment split-dollar life insurance arrangements, whereby the employee owns and controls the insurance policies. The consensus concludes that an employer should recognize a liability for the postretirement benefit in accordance with SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions” (“Statement 106”) or Accounting Principles Board Opinion No. 12 (“APB 12”), as well as recognize an asset based on the substance of the arrangement with the employee. Issue 06-10 is effective for fiscal years beginning after December 15, 2007 with early application permitted. We are in the process of reviewing the potential impact of Issue 06-10. In September 2006, the FASB ratified the consensus the EITF reached regarding EITF Issue No. 06-4, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements” (“Issue 06-4”), which provides accounting guidance for postretirement benefits related to endorsement split-dollar life insurance arrangements, whereby the employer owns and controls the insurance policies. The consensus concludes that an employer should recognize a liability for the postretirement benefit in accordance with Statement 106 or APB 12. In addition, the consensus states that an employer should also recognize an asset based on the substance of the arrangement with the employee. Issue 06-4 is effective for fiscal years beginning after December 15, 2007 with early application permitted. We are in the process of reviewing the potential impact of Issue 06-4. In September 2006, the FASB ratified the consensus the EITF reached regarding EITF Issue No. 06-5, “Accounting for Purchases of Life Insurance — Determining the Amount That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4, Accounting for Purchases of Life Insurance.” FASB Technical Bulletin No. 85-4 requires that the amount that could be realized under the insurance contract as of the date of the statement of financial position should be reported as an asset. Since the issuance of FASB Technical Bulletin No. 85-4, there has been diversity in practice in the calculation of the amount that could be realized under insurance contracts. Issue No. 06-5 concludes that we should consider any additional amounts (e.g., cash stabilization reserves and deferred acquisition cost taxes) included in the contractual terms of the insurance policy other than the cash surrender value in determining the amount that could be realized in accordance with FASB Technical Bulletin No. 85-4. We adopted this standard in the first quarter of 2007 and it did not have a significant impact on our financial statements.

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SEC Staff Accounting Bulletin Staff Accounting Bulletin (“SAB”) No. 108, "Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements." SAB 108 addresses how the effects of prior year uncorrected errors must be considered in quantifying misstatements in the current year financial statements. The effects of prior year uncorrected errors include the potential accumulation of improper amounts that may result in a material misstatement on the balance sheet or the reversal of prior period errors in the current period that result in a material misstatement of the current period income statement amounts. Adjustments to current or prior period financial statements would be required in the event that after application of various approaches for assessing materiality of a misstatement in current period financial statements and consideration of all relevant quantitative and qualitative factors, a misstatement is determined to be material. We adopted SAB 108 in December 2006 and analyzed the impact of prior uncorrected misstatements under the guidance set forth in the pronouncement. Two techniques are used by companies in practice to accumulate and quantify misstatements — the “rollover” approach and the “iron curtain” approach. The rollover approach, which is the approach we previously used, quantifies a misstatement based on the amount of the error originating in the current year income statement. Thus, this approach ignores the effects of correcting the portion of the current year balance sheet misstatement that originated in prior years. The iron curtain approach quantifies a misstatement based on the effects of correcting the misstatement existing in the balance sheet at the end of the current year, irrespective of the misstatement’s year(s) of origination. Subsequent to adoption, SAB No. 108 requires registrants to begin using both approaches to evaluate prior year misstatements. Use of the rollover approach resulted in an accumulation of misstatements to our statements of financial condition that were deemed immaterial to the financial statements because the amounts that originated in each year were quantitatively and qualitatively immaterial. Under the iron curtain approach, the accumulation of misstatements, when aggregated, were deemed to be material to our financial statements in the current reporting period. We elected, as allowed under SAB 108, to reflect the effect of initially applying this guidance by adjusting the carrying amount of the impacted accounts as of the beginning of 2006 and recording an offsetting adjustment to the opening balance of retained earnings in 2006. We recorded a cumulative effect adjustment to decrease retained earnings by $1.2 million (after-tax) for the adoption of SAB 108. We evaluated the impact of these adjustments on previous periods presented in the consolidated financial statements, individually and in the aggregate, under the rollover method and concluded that they were immaterial to those periods’ consolidated financial statements. The following table presents a description of the two adjustments included in the cumulative adjustment to retained earnings. These adjustments were identified by us in the normal course of performing our internal control activities:

Adjustment Description Years Impacted Operating Leases

$ 715,000 Establish deferred rent payable due to difference in using straight-line accounting method for operating leases (required per SFAS 13) versus cash-basis accounting

1990 - 2006

Supplies $ 518,000 Overstatement of prepaid supply account due to improper recognition of sales tax and freight charges when supplies were used

1998 - 2006

Total $ 1,233,000

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Overview Market risk management arises from changes in interest rates, exchange rates, commodity prices, and equity prices. We have risk management policies to monitor and limit exposure to market risk and do not participate in activities that give rise to significant market risk involving exchange rates, commodity prices, or equity prices. In asset and liability management activities, policies are in place that are designed to minimize structural interest rate risk. Interest Rate Risk Management The normal course of business activity exposes us to interest rate risk. Fluctuations in interest rates may result in changes in the fair market value of our financial instruments, cash flows and net interest income. We seek to avoid fluctuations in our net interest margin and to maximize net interest income within acceptable levels of risk through periods of changing interest rates. Accordingly, our interest rate sensitivity and liquidity are monitored on an ongoing basis by our Asset and Liability Committee ("ALCO"), which oversees market risk management and establishes risk measures, limits and policy guidelines for managing the amount of interest rate risk and its effects on net interest income and capital. A variety of measures are used to provide for a comprehensive view of the magnitude of interest rate risk, the distribution of risk, the level of risk over time and the exposure to changes in certain interest rate relationships. ALCO continuously monitors and manages the balance between interest rate-sensitive assets and liabilities. ALCO's objective is to manage the impact of fluctuating market rates on net interest income within acceptable levels. In order to meet this objective, management may adjust the rates charged/paid on loans/deposits or may shorten/lengthen the duration of assets or liabilities within the parameters set by ALCO. Our financial assets and liabilities are classified as other-than-trading. An analysis of the other-than-trading financial components including the fair values, are presented in Table 14. This table presents our consolidated interest rate sensitivity position as of year-end 2007 based upon certain assumptions as set forth in the Notes to the Table. The objective of interest rate sensitivity analysis is to measure the impact on our net interest income due to fluctuations in interest rates. The asset and liability values presented in Table 14 may not necessarily be indicative of our interest rate sensitivity over an extended period of time. We expect declining rates to have an unfavorable impact on the net interest margin, subject to the magnitude and timeframe over which the rate changes occur. However, as general interest rates rise or fall, other factors such as current market conditions and competition may impact how we respond to changing rates and thus impact the magnitude of change in net interest income. Non-maturity deposits offer management greater discretion as to the direction, timing, and magnitude of interest rate changes and can have a material impact on our interest rate sensitivity. In addition, the relative level of interest rates as compared to the current yields/rates of existing assets/liabilities can impact both the direction and magnitude of the change in net interest margin as rates rise and fall from one period to the next. Inflation The impact of inflation on the banking industry differs significantly from that of other industries in which a large portion of total resources are invested in fixed assets such as property, plant and equipment. Assets and liabilities of financial institutions are virtually all monetary in nature, and therefore are primarily impacted by interest rates rather than changing prices. While the general level of inflation underlies most interest rates, interest rates react more to changes in the expected rate of inflation and to changes in monetary and fiscal policy. Net interest income and the interest rate spread are good measures of our ability to react to changing interest rates and are discussed in further detail in the section entitled "Results of Operations."

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Table 14 FINANCIAL ASSETS AND LIABILITIES MARKET RISK ANALYSIS (1) Other Than Trading Portfolio As of December 31, 2007 (Dollars in Thousands) Year 1 Year 2 Year 3 Year 4 Year 5 Beyond Total Fair Value(5) Loans

Fixed Rate $ 306,159 $ 145,265 $ 99,036 $ 39,048 $ 23,130 $ 22,374 $ 635,012 $ 664,241Average Interest Rate 6.76% 8.11% 8.05% 8.48% 8.56% 6.68% 7.44%

Floating Rate(2) 1,047,020 134,999 65,503 8,884 6,687 17,725 1,280,818 1,336,486Average Interest Rate 7.75% 7.69% 7.70% 7.89% 8.05% 8.14% 7.75%

Investment Securities(3) Fixed Rate 96,458 49,810 33,051 4,271 2022 2,279 187,891 187,891

Average Interest Rate 3.58% 3.96% 3.72% 4.60% 5.15% 5.27% 3.76% Floating Rate 2,287 - - - - - 2,287 2,287

Average Interest Rate 5.12% - - - - - 5.12% Other Earning Assets

Floating Rate 166,260 - - - - - 166,260 166,260Average Interest Rate 4.24% - - - - - 4.24%

Total Financial Assets $ 1,618,184 $ 330,074 $ 197,590 $ 52,203 $ 31,839 $ 42,378 $ 2,272,268 $ 2,357,165Average Interest Rate 4.27% 7.31% 7.21% 8.06% 8.23% 7.21% 5.16%

Deposits(4)

Fixed Rate Deposits $ 409,537 $ 43,005 $ 11,476 $ 2,619 $ 2,073 $ 158 $ 468,868 $ 420,251Average Interest Rate 4.31% 4.22% 3.99% 4.05% 3.96% 4.91% 4.29%

Floating Rate Deposits 1,240,914 - - - - - 1,240,914 1,240,914Average Interest Rate 2.25% - - - - - 2.25%

Other Interest Bearing Liabilities

Fixed Rate Debt 2,977 3,368 3,120 3,077 3,233 10,956 26,731 28,284Average Interest Rate 4.82% 4.84% 4.89% 4.97% 4.97% 4.90% 4.90%

Floating Rate Debt 52,553 31,506 31,959 - - 116,018 116,393Average Interest Rate 3.71% 2.99% 6.07% 6.07% - - 3.35%

Total Financial Liabilities $ 1,705,981 $ 77,879 $ 46,555 $ 5,696 $ 5,306 $ 11,114 $ 1,852,531 $ 1,805,842Average interest Rate 2.80% 2.54% 5.48% 4.55% 4.57% 4.90% 2.88%

(1) Based upon expected cash flows unless otherwise indicated. (2) Based upon a combination of expected maturities and re-pricing opportunities. (3) Based upon contractual maturity, except for callable and floating rate securities, which are based on expected maturity and

weighted average life, respectively.

(4) Savings, NOW and money market accounts can be re-priced at any time, therefore, all such balances are included as floating rate deposits. Time deposit balances are classified according to maturity.

(5) Fair value of loans does not include a reduction for the allowance for loan losses.

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Item 8. Financial Statements and Supplementary Data Table 15 QUARTERLY FINANCIAL DATA (Unaudited) 2007 2006 (Dollars in Thousands, Except Per Share Data) Fourth Third Second First Fourth Third Second First Summary of Operations:

Interest Income $ 40,786 $ 41,299 $ 41,724 $ 41,514 $ 42,600 $ 42,512 $ 41,369 $ 39,412 Interest Expense 13,241 13,389 13,263 13,189 13,003 12,289 11,182 10,282 Net Interest Income 27,545 27,910 28,461 28,325 29,597 30,223 30,187 29,130 Provision for Loan Losses 1,699 1,552 1,675 1,237 460 711 121 667 Net Interest Income After

Provision for Loan Losses 25,846 26,358 26,786 27,088 29,137 29,512 30,066 28,463 Noninterest Income 15,823 14,431 15,084 13,962 14,385 14,144 14,003 13,045 Noninterest Expense 31,614 29,919 29,897 30,562 29,984 30,422 31,070 30,092 Income Before Provision for Income

Taxes 10,055 10,870 11,973 10,488 13,538 13,234 12,999 11,416 Provision for Income Taxes 2,391 3,699 4,082 3,531 4,688 4,554 4,684 3,995 Net Income $ 7,664 $ 7,171 $ 7,891 $ 6,957 $ 8,850 $ 8,680 $ 8,315 $ 7,421 Net Interest Income (FTE) $ 28,196 $ 28,517 $ 29,050 $ 28,898 $ 30,152 $ 30,745 $ 30,591 $ 29,461

Per Common Share:

Net Income Basic $ 0.44 $ 0.41 $ 0.43 $ 0.38 $ 0.48 $ 0.47 $ 0.44 $ 0.40 Net Income Diluted 0.44 0.41 0.43 0.38 0.48 0.47 0.44 0.40 Dividends Declared 0.185 0.175 0.175 0.175 0.175 0.163 0.163 0.163 Diluted Book Value 17.03 16.95 16.87 16.97 17.01 17.18 16.81 16.65 Market Price:

High 34.00 36.40 33.69 35.91 35.98 33.25 35.39 37.97 Low 24.60 27.69 29.12 29.79 30.14 29.87 29.51 33.79 Close 28.22 31.20 31.34 33.30 35.30 31.10 30.20 35.55

Selected Average Balances:

Loans $ 1,908,069 $ 1,907,235 $ 1,944,969 $ 1,980,224 $ 2,003,719 $ 2,025,112 $ 2,040,656 $ 2,048,642 Earning Assets 2,191,230 2,144,737 2,187,236 2,211,560 2,238,066 2,241,158 2,278,817 2,275,667 Assets 2,519,682 2,467,703 2,511,252 2,530,790 2,557,357 2,560,155 2,603,090 2,604,458 Deposits 2,016,736 1,954,160 1,987,418 2,003,726 2,028,453 2,023,523 2,047,755 2,040,248 Shareowners’ Equity 299,342 301,536 309,352 316,484 323,903 318,041 315,794 311,461 Common Equivalent Average Shares:

Basic 17,444 17,709 18,089 18,409 18,525 18,530 18,633 18,652 Diluted 17,445 17,719 18,089 18,420 18,569 18,565 18,653 18,665

Ratios:

Return on Assets 1.21% 1.15% 1.26% 1.11% 1.37% 1.35% 1.28% 1.16%Return on Equity 10.16% 9.44% 10.23% 8.91% 10.84% 10.83% 10.56% 9.66%Net Interest Margin (FTE) 5.10% 5.27% 5.33% 5.29% 5.35% 5.45% 5.38% 5.25%Efficiency Ratio 68.51% 66.27% 64.44% 67.90% 63.99% 64.35% 66.23% 67.20%

53

CAPITAL CITY BANK GROUP, INC. CONSOLIDATED FINANCIAL STATEMENTS

PAGE

54 Reports of Independent Registered Public Accounting Firms

56 Consolidated Statements of Financial Condition

57 Consolidated Statements of Income

58 Consolidated Statements of Changes in Shareowners' Equity

59 Consolidated Statements of Cash Flows

60 Notes to Consolidated Financial Statements

54

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of Capital City Bank Group, Inc. We have audited the accompanying consolidated statement of financial condition of Capital City Bank Group, Inc. and subsidiary as of December 31, 2007, and the related consolidated statements of income, changes in shareowners’ equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Capital City Bank Group, Inc. and subsidiary at December 31, 2007 and the consolidated results of their operations and their cash flows for the year ended December 31, 2007, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Capital City Bank Group, Inc.’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 13, 2008 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP Birmingham, Alabama March 13, 2008

55


The Board of Directors Capital City Bank Group, Inc.: We have audited the accompanying consolidated statement of financial condition of Capital City Bank Group, Inc. and subsidiary (the Company) as of December 31, 2006 and the related consolidated statements of income, changes in shareowners’ equity and cash flows for the years ended December 31, 2006 and 2005. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Capital City Bank Group, Inc. and subsidiary as of December 31, 2006 and the results of their operations and their cash flows for the years ended December 31, 2006 and 2005, in conformity with U.S. generally accepted accounting principles. As discussed in Note 1 to the consolidated financial statements, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 123R, Share Based Payment, as of January 1, 2006, SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132R, as of December 31, 2006 and Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, as of January 1, 2006. /s/ KPMG LLP Orlando, Florida March 14, 2007 Certified Public Accountants

56

CAPITAL CITY BANK GROUP, INC. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION As of December 31, (Dollars in Thousands) 2007 2006 ASSETS Cash and Due From Banks $ 93,437 $ 98,769 Federal Funds Sold and Interest Bearing Deposits 166,260 78,795

Total Cash and Cash Equivalents 259,697 177,564 Investment Securities, Available-for-Sale 190,719 191,894 Loans, Net of Unearned Interest 1,915,850 1,999,721

Allowance for Loan Losses (18,066) (17,217)Loans, Net 1,897,784 1,982,504

Premises and Equipment, Net 98,612 86,538 Goodwill 84,811 84,811 Other Intangible Assets 13,757 19,591 Other Assets 70,947 55,008

Total Assets $ 2,616,327 $ 2,597,910

LIABILITIES Deposits:

Noninterest Bearing Deposits $ 432,659 $ 490,014 Interest Bearing Deposits 1,709,685 1,591,640

Total Deposits 2,142,344 2,081,654 Short-Term Borrowings 53,131 65,023 Subordinated Notes Payable 62,887 62,887 Other Long-Term Borrowings 26,731 43,083 Other Liabilities 38,559 29,493

Total Liabilities 2,323,652 2,282,140 SHAREOWNERS' EQUITY Preferred Stock, $.01 par value; 3,000,000 shares authorized; no shares issued and

outstanding - - Common Stock, $.01 par value; 90,000,000 shares authorized; 17,182,553 and 18,518,398

shares issued and outstanding at December 31, 2007 and December 31, 2006, respectively 172 185 Additional Paid-In Capital 38,243 80,654 Retained Earnings 260,325 243,242 Accumulated Other Comprehensive Loss, Net of Tax (6,065) (8,311)

Total Shareowners' Equity 292,675 315,770 Total Liabilities and Shareowners' Equity $ 2,616,327 $ 2,597,910

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

57

CAPITAL CITY BANK GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME For the Years Ended December 31, (Dollars in Thousands, Except Per Share Data)(1) 2007 2006 2005 INTEREST INCOME Interest and Fees on Loans $ 154,567 $ 156,666 $ 133,268 Investment Securities:

U.S. Treasury 574 453 412 U.S. Government Agencies and Corporations 3,628 3,605 3,223 States and Political Subdivisions 2,894 2,337 1,545 Other Securities 747 793 614

Funds Sold 2,913 2,039 991 Total Interest Income 165,323 165,893 140,053

INTEREST EXPENSE Deposits 44,687 37,253 21,134 Short-Term Borrowings 2,871 3,075 2,854 Subordinated Notes Payable 3,730 3,725 2,981 Other Long-Term Borrowings 1,794 2,704 3,094

Total Interest Expense 53,082 46,757 30,063 NET INTEREST INCOME 112,241 119,136 109,990 Provision for Loan Losses 6,163 1,959 2,507 Net Interest Income After

Provision for Loan Losses 106,078 117,177 107,483 NONINTEREST INCOME Service Charges on Deposit Accounts 26,130 24,620 20,740 Data Processing 3,133 2,723 2,610 Asset Management Fees 4,700 4,600 4,419 Securities Transactions 14 (4) 9 Mortgage Banking Revenues 2,596 3,235 4,072 Bank Card Fees 13,706 12,602 10,619 Other 9,021 7,801 6,729

Total Noninterest Income 59,300 55,577 49,198 NONINTEREST EXPENSE Salaries and Associate Benefits 60,279 60,855 53,687 Occupancy, Net 9,347 9,395 8,293 Furniture and Equipment 9,890 9,911 8,970 Intangible Amortization 5,834 6,085 5,440 Merger Expense - - 438 Other 36,642 35,322 32,986

Total Noninterest Expense 121,992 121,568 109,814 INCOME BEFORE INCOME TAXES 43,386 51,186 46,867 Income Taxes 13,703 17,921 16,586 NET INCOME $ 29,683 $ 33,265 $ 30,281

BASIC NET INCOME PER SHARE $ 1.66 $ 1.79 $ 1.66

DILUTED NET INCOME PER SHARE $ 1.66 $ 1.79 $ 1.66

Average Basic Common Shares Outstanding 17,909 18,585 18,264

Average Diluted Common Shares Outstanding 17,912 18,610 18,281

(1) All share and per share data have been adjusted to reflect the 5-for-4 stock split effective July 1, 2005. The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

58

CAPITAL CITY BANK GROUP, INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY

(Dollars in Thousands, Except Per Share Data)(1)

Common

Stock

AdditionalPaid-In Capital

Retained Earnings

Accumulated Other

Comprehensive(Loss) Income,Net of Taxes Total

Balance, December 31, 2004 $ 177 $ 52,328 $ 204,648 $ (353 $ 256,800

Comprehensive Income: Net Income - - 30,281 - - Net Change in Unrealized Loss On Available-for-

Sale Securities (net of tax) - - - (893) - Total Comprehensive Income - - - - 29,388 Cash Dividends ($.584 per share) - - (11,397) - (11,397)Stock Performance Plan Compensation - 968 - - 968 Issuance of Common Stock 9 30,008 - - 30,017 Balance, December 31, 2005 186 83,304 223,532 (1,246) 305,776

Cumulative Effect Adjustment upon adoption of SAB No. 108 (net of tax) - - (1,233) - (1,233)

Balance (adjusted), December 31, 2005 186 83,304 222,299 (1,246) 304,543Comprehensive Income:

Net Income - - 33,265 - - Net Change in Unrealized Loss On Available-for-

Sale Securities (net of tax) - - - 412 - Total Comprehensive Income - - - - 33,677 Establish Pension Liability upon adoption of SFAS No.

158 (net of tax) - - - (7,477) (7,477)Cash Dividends ($.663 per share) - - (12,322) - (12,322)Stock Performance Plan Compensation - 1,673 - - 1,673Issuance of Common Stock 1 1,035 - - 1,036 Repurchase of Common Stock (2) (5,358) - - (5,360) Balance, December 31, 2006 185 80,654 243,242 (8,311) 315,770 Comprehensive Income:

Net Income - - 29,683 - - Net Change in Unrealized Loss On Available-for-

Sale Securities (net of tax) - - - 1,080 Net Change in Funded Status of Defined Pension

Plan and SERP Plan (net of tax) - - - 1,166 Total Comprehensive Income - - - - 31,929 Miscellaneous – Other - - 223 - 223 Cash Dividends ($.710 per share) - - (12,823) - (12,823)Stock Performance Plan Compensation - 265 - - 265 Issuance of Common Stock 1 571 - - 572 Repurchase of Common Stock (14) (43,247) - - (43,261) Balance, December 31, 2007 $ 172 $ 38,243 $ 260,325 $ (6,065) $ 292,675

(1) All share, per share, and shareowners' equity data have been adjusted to reflect the 5-for-4 stock split effective July 1 2005. The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

59

CAPITAL CITY BANK GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, (Dollars in Thousands) 2007 2006 2005 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 29,683 $ 33,265 $ 30,281 Adjustments to Reconcile Net Income to Cash Provided by Operating Activities:

Provision for Loan Losses 6,163 1,959 2,507 Depreciation 6,338 6,795 5,899 Net Securities Amortization 279 582 1,454 Amortization of Intangible Assets 5,834 6,085 5,440 (Gain)Loss on Securities Transactions (14) 4 (9) Origination of Loans Held-for-Sale (158,390) (190,945) (219,171) Proceeds From Sales of Loans Held-for-Sale 162,835 194,569 227,853 Net Gain From Sales of Loans Held-for Sale (2,596) (3,235) (4,072) Non-Cash Compensation 265 1,673 968 Deferred Income Taxes 1,328 1,614 182 Net Increase in Other Assets (12,894) (11,327) (11,839) Net Increase in Other Liabilities 8,115 5,148 9,264

Net Cash Provided by Operating Activities 46,946 46,187 48,757 CASH FLOWS FROM INVESTING ACTIVITIES: Securities Available-for-Sale:

Purchases (56,289) (102,628) (45,717) Sales - 283 35,142 Payments, Maturities, and Calls 58,894 81,500 81,783

Net Decrease (Increase) in Loans 74,058 64,213 (127,715) Net Cash Acquired From Acquisitions - - 37,412 Purchase of Premises & Equipment (18,613) (20,145) (18,336) Proceeds From Sales of Premises & Equipment 203 630 897 Net Cash Provided By (Used In) Investing Activities 58,253 23,853 (36,534) CASH FLOWS FROM FINANCING ACTIVITIES: Net Increase (Decrease) in Deposits 60,690 2,308 (17,125) Net Decrease in Short-Term Borrowings (12,263) (31,412) (33,085) Proceeds from Subordinated Notes Payable - - 31,959 (Decrease) Increase in Other Long-Term Borrowings (10,618) 3,250 23,600 Repayment of Other Long-Term Borrowings (5,363) (16,335) (2,380) Dividends Paid (12,823) (12,322) (11,397) Repurchase of Common Stock (43,261) (5,360) - Issuance of Common Stock 572 1,036 1,019 Net Cash Used In Financing Activities (23,066) (58,835) (7,409) NET CHANGE IN CASH AND CASH EQUIVALENTS 82,133 11,205 4,814 Cash and Cash Equivalents at Beginning of Year 177,564 166,359 161,545 Cash and Cash Equivalents at End of Year $ 259,697 $ 177,564 $ 166,359

SUPPLEMENTAL DISCLOSURES: Interest Paid on Deposits $ 44,510 $ 36,509 $ 19,964 Interest Paid on Debt $ 8,463 $ 9,688 $ 8,754 Taxes Paid $ 12,431 $ 16,797 $ 15,923 Loans Transferred to Other Real Estate $ 3,494 $ 1,018 $ 2,689 Cumulative Effect Adjustment to Beginning Retained Earnings – SAB 108 $ - $ 1,233 $ - Cumulative Effect Adjustment to Other Comprehensive Income to Record

Minimum Pension Liability – SFAS 158 $ - $ 7,477 $ - Issuance of Common Stock as Non-Cash Compensation $ 1,160 $ 711 $ 339 Transfer of Current Portion of Long-Term Borrowings

to Short-Term Borrowings $ 12,318 $ 13,061 $ 20,043

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

60

Notes to Consolidated Financial Statements Note 1 SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The consolidated financial statements include the accounts of Capital City Bank Group, Inc. ("CCBG"), and its wholly-owned subsidiary, Capital City Bank ("CCB" or the "Bank" and together with CCBG, the "Company"). All material inter-company transactions and accounts have been eliminated. The Company, which operates in a single reportable business segment comprised of commercial banking within the states of Florida, Georgia, and Alabama, follows accounting principles generally accepted in the United States of America and reporting practices applicable to the banking industry. The principles which materially affect the financial position, results of operations and cash flows are summarized below. The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity or a variable interest entity under accounting principles generally accepted in the United States of America. Voting interest entities are entities in which the total equity investment at risk is sufficient to enable the entity to finance itself independently and provide the equity holders with the obligation to absorb losses, the right to receive residual returns and the right to make decisions about the entity’s activities. The Company consolidates voting interest entities in which it has all, or at least a majority of, the voting interest. As defined in applicable accounting standards, variable interest entities (VIEs) are entities that lack one or more of the characteristics of a voting interest entity. A controlling financial interest in an entity is present when an enterprise has a variable interest, or a combination of variable interests, that will absorb a majority of the entity’s expected losses, receive a majority of the entity’s expected residual returns, or both. The enterprise with a controlling financial interest, known as the primary beneficiary, consolidates the VIE. CCBG's wholly-owned subsidiaries, CCBG Capital Trust I (established November 1, 2004) and CCBG Capital Trust II (established May 24, 2005) are VIEs for which the Company is not the primary beneficiary. Accordingly, the accounts of these entities are not included in the Company’s consolidated financial statements. Certain items in prior financial statements have been reclassified to conform to the current presentation. All acquisitions during the reported periods were accounted for using the purchase method. Accordingly, the operating results of the acquired companies are included with the Company’s results of operations since their respective dates of acquisition. On July 1, 2005, the Company executed a five-for-four stock split in the form of a 25% stock dividend, payable to shareowners of record as of the close of business on June 17, 2005. All share, per share, and shareowners' equity data have been adjusted to reflect the stock split. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could vary from these estimates. Material estimates that are particularly susceptible to significant changes in the near-term relate to the determination of the allowance for loan losses, income taxes, loss contingencies, and valuation of goodwill and other intangibles and their respective analysis of impairment. Cash and Cash Equivalents Cash and cash equivalents include cash and due from banks, interest-bearing deposits in other banks, and federal funds sold. Generally, federal funds are purchased and sold for one-day periods and all other cash equivalents have a maturity of 90 days or less. The Company is required to maintain average reserve balances with the Federal Reserve Bank based upon a percentage of deposits. The average amounts of these reserve balances for the years ended December 31, 2007 and 2006 were $25.8 million and $18.7 million, respectively.

61

Investment Securities Investment securities available-for-sale is carried at fair value and represents securities that are available to meet liquidity and/or other needs of the Company. Gains and losses are recognized and reported separately in the Consolidated Statements of Income upon realization or when impairment of values is deemed to be other than temporary. In estimating other-than-temporary impairment losses, management considers, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for anticipated recovery in fair value. Gains or losses are recognized using the specific identification method. Unrealized holding gains and losses for securities available-for-sale are excluded from the Consolidated Statements of Income and reported net of taxes in the accumulated other comprehensive income component of shareowners' equity until realized. Accretion and amortization are recognized on the effective yield method over the life of the securities. Loans Loans are stated at the principal amount outstanding, net of unearned income. Interest income is accrued on the effective yield method based on outstanding balances. Fees charged to originate loans and direct loan origination costs are deferred and amortized over the life of the loan as a yield adjustment. The Company defines loans as past due when one full payment is past due or a contractual maturity is over 30 days late. The accrual of interest is generally suspended on loans more than 90 days past due with respect to principal or interest. When a loan is placed on nonaccrual status, all previously accrued and uncollected interest is reversed against current income. Interest income on nonaccrual loans is recognized on a cash basis when the ultimate collectability is no longer considered doubtful. Loans are returned to accrual status when the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Loans are charged-off (if unsecured) or written-down (if secured) when losses are probable and reasonably quantifiable. Loans Held For Sale Certain residential mortgage loans are originated for sale in the secondary mortgage loan market. Additionally, certain other loans are periodically identified to be sold. The Company has the ability and intent to sell these loans and they are classified as loans held for sale and carried at the lower of cost or estimated fair value. At December 31, 2007 and December 31, 2006, the Company had $2.8 million and $4.2 million, respectively, in loans classified as held for sale which were committed to be purchased by third party investors. Fair value is determined on the basis of rates quoted in the respective secondary market for the type of loan held for sale. Loans are generally sold with servicing released at a premium or discount from the carrying amount of the loans. Such premium or discount is recognized as mortgage banking revenue at the date of sale. Fixed commitments may be used at the time loans are originated or identified for sale to mitigate interest rate risk. The fair value of fixed commitments to originate and sell loans held for sale is not material. Allowance for Loan Losses The allowance for loan losses is a reserve established through a provision for loan losses charged to expense, which represents management’s best estimate of probable losses that have been incurred within the existing portfolio of loans. The allowance is that amount considered adequate to absorb losses inherent in the loan portfolio based on management’s evaluation of credit risk as of the balance sheet date. The allowance for loan losses includes allowance allocations calculated in accordance with Statement of Financial Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan," as amended by SFAS 118, and allowance allocations calculated in accordance with SFAS 5, "Accounting for Contingencies." The level of the allowance reflects management’s continuing evaluation of specific credit risks, loan loss experience, current loan portfolio quality, present economic conditions and unidentified losses inherent in the current loan portfolio, as well as trends in the foregoing. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. The Company’s allowance for loan losses consists of three components: (i) specific valuation allowances established for probable losses on specific loans deemed impaired; (ii) valuation allowances calculated for specific homogenous loan pools based on, but not limited to, historical loan loss experience, current economic conditions, levels of past due loans, and levels of problem loans; (iv) an unallocated allowance that reflects management’s determination of estimation risk.

62

Long-Lived Assets Premises and equipment is stated at cost less accumulated depreciation, computed on the straight-line method over the estimated useful lives for each type of asset with premises being depreciated over a range of 10 to 40 years, and equipment being depreciated over a range of 3 to 10 years. Additions, renovations and leasehold improvements to premises are capitalized and depreciated over the lesser of the useful life or the remaining lease term. Repairs and maintenance are charged to noninterest expense as incurred. Intangible assets, other than goodwill, consist of core deposit intangible assets, and client relationship and non-compete assets that were recognized in connection with various acquisitions. Core deposit intangible assets are amortized on the straight-line method over various periods, with the majority being amortized over an average of 5 to 10 years. Other identifiable intangibles are amortized on the straight-line method over their estimated useful lives. Long-lived assets are evaluated for impairment if circumstances suggest that their carrying value may not be recoverable, by comparing the carrying value to estimated undiscounted cash flows. If the asset is deemed impaired, an impairment charge is recorded equal to the carrying value less the fair value. Goodwill Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142") prohibits the Company from amortizing goodwill and requires the Company to identify reporting units to which the goodwill relates for purposes of assessing potential impairment of goodwill on an annual basis, or more frequently, if events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. In accordance with the guidelines in SFAS 142, the Company determined it has one goodwill reporting unit. As of December 31, 2007, the Company performed its annual impairment review and concluded that no impairment adjustment was necessary. Foreclosed Assets Assets acquired through or instead of loan foreclosure are held for sale and are initially recorded at the lower of cost or fair value less estimated selling costs when acquired. Costs after acquisition are generally expensed. If the fair value of the asset declines, a write-down is recorded through expense. The valuation of foreclosed assets is subjective in nature and may be adjusted in the future because of changes in economic conditions. Foreclosed assets are included in other assets in the accompanying consolidated balance sheets and totaled $3.0 million and $0.7 million at December 31, 2007 and 2006. Loss Contingencies Loss contingencies, including claims and legal actions arising in the ordinary course of business are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Income Taxes The Company files a consolidated federal income tax return and each subsidiary files a separate state income tax return. Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount that is expected to be realized. Deferred tax assets are recognized for net operating losses that expires beginning in 2022 because the benefit is more likely than not to be realized. The Company adopted FASB Interpretation 48, Accounting for Uncertainty in Income Taxes (“FIN 48”), as of January 1, 2007. A tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the "more likely than not" test, no tax benefit is recorded. The adoption had no material affect on the Company’s financial statements. The Company recognizes interest and/or penalties related to income tax matters in income tax expense.

63

Earnings Per Common Share Basic earnings per common share is based on net income divided by the weighted-average number of common shares outstanding during the period excluding non-vested stock. Diluted earnings per common share include the dilutive effect of stock options and non-vested stock awards granted using the treasury stock method. A reconciliation of the weighted-average shares used in calculating basic earnings per common share and the weighted average common shares used in calculating diluted earnings per common share for the reported periods is provided in Note 13 — Earnings Per Share. Comprehensive Income Comprehensive income includes all changes in shareowners’ equity during a period, except those resulting from transactions with shareholders. Besides net income, other components of the Company’s comprehensive income include the after tax effect of changes in the net unrealized gain/loss on securities available for sale and changes in the funded status of defined benefit and SERP plans. Comprehensive income is reported in the accompanying consolidated statements of changes in shareowners’ equity. In the Company’s 2006 Form 10-K, a SFAS 158 transition adjustment in the amount of $(7,477), net of tax, was recognized as a component of 2006 Comprehensive Income in the Consolidated Statements of Changes in Shareowners’ Equity and in Note 21 – Comprehensive Income. This adjustment was misapplied as a component of 2006 Comprehensive Income. The table below reflects the misapplication of this adjustment at December 31, 2006.

As Reported Misapplied As Revised Statements of Changes in Stockholders’

Equity - Comprehensive Income

$

26,200

$

7,477

$

33,677 Note 21 – Comprehensive Income – Net

Other Comprehensive Gain (Loss)

$

(7,065)

$

7,477

$

412 The Company has corrected the Comprehensive Income presentation in the appropriate schedules within the 2007 Form 10-K. These corrections did not have an affect on the Consolidated Statements of Financial Condition or Consolidated Statements of Income. Stock Based Compensation On January 1, 2006, the Company changed its accounting policy related to stock-based compensation in connection with the adoption of Statement of Financial Accounting Standards No. 123R, "Share-Based Payment (Revised 2004)" ("SFAS 123R"). See Note 11 – Stock-Based Compensation for additional information.

64

Recent Accounting Pronouncements Statement of Financial Accounting Standards (“SFAS’) SFAS No. 141, “Business Combinations (Revised 2007).” SFAS 141R replaces SFAS 141, “Business Combinations,” and applies to all transactions and other events in which one entity obtains control over one or more other businesses. SFAS 141R requires an acquirer, upon initially obtaining control of another entity, to recognize the assets, liabilities and any non-controlling interest in the acquiree at fair value as of the acquisition date. Contingent consideration is required to be recognized and measured at fair value on the date of acquisition rather than at a later date when the amount of that consideration may be determinable beyond a reasonable doubt. This fair value approach replaces the cost-allocation process required under SFAS 141 whereby the cost of an acquisition was allocated to the individual assets acquired and liabilities assumed based on their estimated fair value. SFAS 141R requires acquirers to expense acquisition-related costs as incurred rather than allocating such costs to the assets acquired and liabilities assumed, as was previously the case under SFAS 141. Under SFAS 141R, the requirements of SFAS 146, Accounting for Costs Associated with Exit or Disposal Activities,” would have to be met in order to accrue for a restructuring plan in purchase accounting. Pre-acquisition contingencies are to be recognized at fair value, unless it is a non-contractual contingency that is not likely to materialize, in which case, nothing should be recognized in purchase accounting and, instead, that contingency would be subject to the probable and estimable recognition criteria of SFAS 5, “Accounting for Contingencies.” SFAS 141R is effective for business combinations closing on or after January 1, 2009. The Company is in the process of reviewing the impact of SFAS 141R. SFAS No. 154, “Accounting Changes and Error Corrections, a Replacement of APB Opinion No. 20 and FASB Statement No. 3.” SFAS 154 establishes, unless impracticable, retrospective application as the required method for reporting a change in accounting principle in the absence of explicit transition requirements specific to a newly adopted accounting principle. Previously, most changes in accounting principle were recognized by including the cumulative effect of changing to the new accounting principle in net income of the period of the change. SFAS 154 carries forward the guidance in APB Opinion 20 “Accounting Changes,” requiring justification of a change in accounting principle on the basis of preferability. SFAS 154 also carries forward without change the guidance contained in APB Opinion 20, for reporting the correction of an error in previously issued financial statements and for a change in an accounting estimate. The adoption of SFAS 154 on January 1, 2006 did not significantly impact the Company’s financial statements. SFAS No. 157, "Fair Value Measurements." SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 is effective on January 1, 2008 and is not expected to have a significant impact on the Company’s financial statements. SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of Financial Accounting Standards Board (“FASB”) Statements No. 87, 88 106, and 132(R)." SFAS 158 requires an employer to recognize the over-funded or under-funded status of defined benefit postretirement plans as an asset or a liability in its statement of financial position. The funded status is measured as the difference between plan assets at fair value and the benefit obligation (the projected benefit obligation for pension plans or the accumulated benefit obligation for other postretirement benefit plans). An employer is also required to measure the funded status of a plan as of the date of its year-end statement of financial position with changes in the funded status recognized through comprehensive income. SFAS 158 also requires certain disclosures regarding the effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of gains or losses, prior service costs or credits, and the transition asset or obligation. The Company recognized the funded status of their defined benefit pension plan in the financial statements for the year ended December 31, 2006. SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities-Including an amendment of FASB Statement No. 115." SFAS 159 permits entities to choose to measure eligible items at fair value at specified election dates. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings at each subsequent reporting date. The fair value option (i) may be applied instrument by instrument, with certain exceptions, (ii) is irrevocable (unless a new election date occurs) and (iii) is applied only to entire instruments and not to portions of instruments. SFAS 159 is effective January 1, 2008 and is not expected to have a significant impact on the Company’s financial statements. SFAS No. 160, “Noncontrolling Interest in Consolidated Financial Statements, an amendment of ARB Statement No. 51.” SFAS 160 amends Accounting Research Bulletin (ARB) No. 51, “Consolidated Financial Statements,” to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 clarifies that a non-controlling interest in a subsidiary, which is sometimes referred to as minority interest, is an ownership interest in the consolidated entity that should be reported as a component of equity in the consolidated financial statements. Among other requirements, SFAS 160 requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the non-controlling interest. It also requires disclosure, on the face of the consolidated income statement, of the amounts of consolidated net income attributable to the parent and to the non-controlling interest. SFAS 160 is effective on January 1, 2009 and is not expected to have a significant impact on the Company’s financial statements.

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Financial Accounting Standards Board Interpretations In July 2006, the FASB issued FIN 48 which defines the threshold for recognizing the benefits of tax return positions in the financial statements as "more-likely-than-not" to be sustained by the taxing authority. The recently issued literature also provides guidance on the de-recognition, measurement and classification of income tax uncertainties, along with any related interest and penalties. FIN 48 also includes guidance concerning accounting for income tax uncertainties in interim periods and increases the level of disclosures associated with any recorded income tax uncertainties. The differences between the amounts recognized in the statements of financial position prior to the adoption of FIN 48 and the amounts reported after adoption will be accounted for as a cumulative-effect adjustment recorded to the beginning balance of retained earnings. FIN 48 became effective in the first quarter of 2007 and did not have a material impact on the Company’s financial statements. Emerging Issues Task Force In March 2007, the FASB ratified the consensus the Emerging Issues Task Force (“EITF”) reached regarding EITF Issue No. 06-10, “Accounting for Collateral Assignment Split-Dollar Life Insurance Arrangements” (“Issue 06-10”), which provides accounting guidance for postretirement benefits related to collateral assignment split-dollar life insurance arrangements, whereby the employee owns and controls the insurance policies. The consensus concludes that an employer should recognize a liability for the postretirement benefit in accordance with SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions” (“Statement 106”) or Accounting Principles Board Opinion No. 12 (“APB 12”), as well as recognize an asset based on the substance of the arrangement with the employee. Issue 06-10 is effective for fiscal years beginning after December 15, 2007 with early application permitted. The Company is in the process of reviewing the potential impact of Issue 06-10. In September 2006, the FASB ratified the consensus the EITF reached regarding EITF Issue No. 06-4, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements” (“Issue 06-4”), which provides accounting guidance for postretirement benefits related to endorsement split-dollar life insurance arrangements, whereby the employer owns and controls the insurance policies. The consensus concludes that an employer should recognize a liability for the postretirement benefit in accordance with Statement 106 or APB 12. In addition, the consensus states that an employer should also recognize an asset based on the substance of the arrangement with the employee. Issue 06-4 is effective for fiscal years beginning after December 15, 2007 with early application permitted. The Company is in the process of reviewing the potential impact of Issue 06-4. In September 2006, the FASB ratified the consensus the EITF reached regarding EITF Issue No. 06-5, “Accounting for Purchases of Life Insurance — Determining the Amount That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4, Accounting for Purchases of Life Insurance.” FASB Technical Bulletin No. 85-4 requires that the amount that could be realized under the insurance contract as of the date of the statement of financial position should be reported as an asset. Since the issuance of FASB Technical Bulletin No. 85-4, there has been diversity in practice in the calculation of the amount that could be realized under insurance contracts. Issue No. 06-5 concludes that the Company should consider any additional amounts (e.g., cash stabilization reserves and deferred acquisition cost taxes) included in the contractual terms of the insurance policy other than the cash surrender value in determining the amount that could be realized in accordance with FASB Technical Bulletin No. 85-4. The Company adopted this standard in the first quarter of 2007 with no significant impact on their financial statements. SEC Staff Accounting Bulletin Staff Accounting Bulletin (“SAB”) No. 108, "Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements." SAB 108 addresses how the effects of prior year uncorrected errors must be considered in quantifying misstatements in the current year financial statements. The effects of prior year uncorrected errors include the potential accumulation of improper amounts that may result in a material misstatement on the balance sheet or the reversal of prior period errors in the current period that result in a material misstatement of the current period income statement amounts. Adjustments to current or prior period financial statements would be required in the event that after application of various approaches for assessing materiality of a misstatement in current period financial statements and consideration of all relevant quantitative and qualitative factors, a misstatement is determined to be material. The Company adopted SAB 108 in December 2006 and analyzed the impact of prior uncorrected misstatements under the guidance set forth in the pronouncement. Two techniques are used by companies in practice to accumulate and quantify misstatements — the “rollover” approach and the “iron curtain” approach. The rollover approach, which is the approach the Company previously used, quantifies a misstatement based on the amount of the error originating in the current year income statement. Thus, this approach ignores the effects of correcting the portion of the current year balance sheet misstatement that originated in prior years. The iron curtain approach quantifies a misstatement based on the effects of correcting the misstatement existing in the balance sheet at the end of the current year, irrespective of the misstatement’s year(s) of origination. Subsequent to adoption, SAB No. 108 requires registrant’s to begin using both approaches to evaluate prior year misstatements.

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Use of the rollover approach by the Company resulted in an accumulation of misstatements to the Company’s statements of financial condition that were deemed immaterial to the financial statements because the amounts that originated in each year were quantitatively and qualitatively immaterial. Under the iron curtain approach, the accumulation of misstatements, when aggregated, were deemed to be material to the Company’s financial statements in the current reporting period. The Company elected, as allowed under SAB 108, to reflect the effect of initially applying this guidance by adjusting the carrying amount of the impacted accounts as of the beginning of 2006 and recording an offsetting adjustment to the opening balance of retained earnings in 2006. The Company recorded a cumulative effect adjustment to decrease retained earnings by $1.2 million (after-tax) for the adoption of SAB 108. The Company evaluated the impact of these adjustments on previous periods presented in the consolidated financial statements, individually and in the aggregate, under the rollover method and concluded that they were immaterial to those periods’ consolidated financial statements. The following table presents a description of the two adjustments included in the cumulative adjustment to retained earnings. These adjustments were identified by management in the normal course of performing their internal control activities:

Adjustment Description Years Impacted Operating Leases

$ 715,000 Establish deferred rent payable due to difference in using straight-line accounting for operating leases (required per SFAS 13) versus cash-basis accounting

1990 - 2006

Supplies $ 518,000 Overstatement of prepaid supply account due to improper recognition of sales tax and freight charges when supplies were used

1998 - 2006

Total $ 1,233,000

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Note 2 INVESTMENT SECURITIES Investment Portfolio Composition. The amortized cost and related market value of investment securities available-for-sale at December 31, were as follows: 2007

(Dollars in Thousands) Amortized Cost

Unrealized Gains

Unrealized Losses

Market Value

U.S. Treasury $ 16,216 $ 97 $ - $ 16,313 U.S. Government Agencies and Corporations 45,489 295 34 45,750 States and Political Subdivisions 90,014 164 177 90,001 Mortgage-Backed Securities 26,334 85 132 26,287 Other Securities(1) 12,307 61 0 12,368

Total Investment Securities $ 190,360 $ 702 $ 343 $ 190,719

2006

(Dollars in Thousands) Amortized Cost

Unrealized Gains

Unrealized Losses

Market Value

U.S. Treasury $ 12,098 $ 16 $ 49 $ 12,065 U.S. Government Agencies and Corporations 61,619 37 593 61,063 States and Political Subdivisions 83,621 16 415 83,222 Mortgage-Backed Securities 23,244 23 371 22,896 Other Securities(1) 12,648 - - 12,648

Total Investment Securities $ 193,230 $ 92 $ 1,428 $ 191,894

(1) Includes FHLB and FRB stock recorded at cost of $6.5 million and $4.8 million, respectively, at December 31, 2007 and

$7.8 million and $4.8 million, respectively, at December 31, 2006. Securities with an amortized cost of $77.2 million and $87.6 million at December 31, 2007 and 2006, respectively, were pledged to secure public deposits and for other purposes. The Company’s subsidiary, Capital City Bank, as a member of the Federal Home Loan Bank (“FHLB”) of Atlanta, is required to own capital stock in the FHLB of Atlanta based generally upon the balances of residential and commercial real estate loans, and FHLB advances. FHLB stock of $6.5 million which is included in other securities, is pledged to secure FHLB advances. No ready market exists for this stock, and it has no quoted market value. However, redemption of this stock has historically been at par value. Investment Sales. The total proceeds from the sale or call of investment securities and the gross realized gains and losses from the sale or call of such securities for each of the last three years are as follows:

(Dollars in Thousands) Year Total

Proceeds Gross

Realized Gains Gross

Realized Losses 2007 $ 53,011 $ 14 $ - 2006 $ 283 $ - $ 4 2005 $ 35,142 $ 9 $ - Maturity Distribution. As of December 31, 2007, the Company's investment securities had the following maturity distribution based on contractual maturities: (Dollars in Thousands) Amortized Cost Market Value Due in one year or less $ 66,240 $ 66,384 Due after one through five years 104,647 104,867 Due after five through ten years 8,166 8,161 No Maturity 11,307 11,307

Total Investment Securities $ 190,360 $ 190,719

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

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Other Than Temporarily Impaired Securities. Securities with unrealized losses at year-end not recognized in income by period of time unrealized losses have existed are as follows: December 31, 2007

Less Than 12 months

Greater Than 12 Months Total

(Dollars in Thousands) Market Value

UnrealizedLosses

Market Value

Unrealized Losses

Market Value

UnrealizedLosses

U.S. Treasury $ 12,258 $ - $ - $ - $ 12,258 $ - U.S. Government Agencies and

Corporations 39,278 16 6,471 18 45,749 34 States and Political Subdivisions 70,701 147 13,924 30 84,625 177 Mortgage-Backed Securities 14,058 4 10,376 128 24,434 132

Total Investment Securities $ 136,295 $ 167 $ 30,771 $ 176 $ 167,066 $ 343 December 31, 2006

Less Than 12 months

Greater Than 12 Months Total

(Dollars in Thousands) Market Value

UnrealizedLosses

Market Value

Unrealized Losses

Market Value

UnrealizedLosses

U.S. Treasury $ 12,065 $ 49 $ - $ - $ 12,065 $ 49U.S. Government Agencies and

Corporations 29,308 172 30,242 421 59,550 593States and Political Subdivisions 46,576 219 30,087 196 76,663 415Mortgage-Backed Securities 9,156 1 13,560 370 22,716 371

Total Investment Securities $ 97,105 $ 441 $ 73,889 $ 987 $ 170,994 $ 1,428

At December 31, 2007, the Company had securities of $190.4 million with net unrealized gains of $.4 million on these securities. Of the total, $136.3 million with unrealized losses of $0.2 million have been in a loss position for less than 12 months and $30.8 million, with unrealized losses of $.2 million, have been in a loss position for longer than 12 months. The Company believes that these securities are only temporarily impaired and that the full principal will be collected as anticipated. Of the total, $58.0 million, or 34.7%, is either a direct obligation of the U.S. Government or its agencies and are in a loss position because they were acquired when the general level of interest rates was lower than that on December 31, 2007. As of December 31, 2007, $24.4 million, or 14.6% are mortgage-backed securities that are obligations of U.S. Government sponsored entities. The mortgage-backed securities are in a loss position due to either the lower interest rate at time of purchase or due to accelerated prepayments driven by the low rate environment. The remaining $84.6 million, or 50.7%, of the securities in a loss position are municipal bonds which all maintain satisfactory ratings by a credit rating agency. The municipal bonds are also in a loss position due to the lower interest rate environment at the time of purchase. Because the declines in the market value of these investments are attributable to changes in interest rates and not credit quality and because the Company has the ability and intent to hold these investments until there is a recovery in fair value, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at December 31, 2007.

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Note 3 LOANS Loan Portfolio Composition. At December 31, the composition of the Company's loan portfolio was as follows: (Dollars in Thousands) 2007 2006 Commercial, Financial and Agricultural $ 208,864 $ 229,327 Real Estate - Construction 142,248 179,072 Real Estate - Commercial Mortgage 634,920 643,885 Real Estate – Residential(1) 485,608 531,968 Real Estate - Home Equity 192,428 173,597 Real Estate - Loans Held-for-Sale 2,764 4,170 Consumer 249,018 237,702

Total Loans, Net of Unearned Interest $ 1,915,850 $ 1,999,721 Net deferred fees included in loans at December 31, 2007 and December 31, 2006 were $1.6 million and $1.5 million, respectively. (1) Includes loans in process with outstanding balances of $7.4 million and $11.5 million for 2007 and 2006, respectively. Concentrations of Credit. Substantially all of the Company's lending activity occurs within the states of Florida, Georgia, and Alabama. A large majority of the Company's loan portfolio (76.1%) consists of loans secured by real estate, the primary types of collateral being commercial properties and residential properties. At December 31, 2007, commercial real estate mortgage loans and residential real estate mortgage loans accounted for 33.1% and 35.5% of the loan portfolio, respectively. As of December 31, 2007, there were no concentrations of loans related to any single borrower or industry in excess of 10% of total loans. Nonperforming/Past Due Loans. Nonaccruing loans amounted to $25.1 million and $8.0 million, at December 31, 2007 and 2006, respectively. There were no restructured loans at December 31, 2007 or 2006. Interest on nonaccrual loans is generally recognized only when received. Cash collected on nonaccrual loans is applied against the principal balance or recognized as interest income based upon management's expectations as to the ultimate collectability of principal and interest in full. If interest on nonaccruing loans had been recognized on a fully accruing basis, interest income recorded would have been $922,000, $483,000, and $186,000 higher for the years ended December 31, 2007, 2006, and 2005, respectively. Accruing loans past due more than 90 days totaled $416,000 at December 31, 2007 and $135,000 at December 31, 2006. Note 4 ALLOWANCE FOR LOAN LOSSES An analysis of the changes in the allowance for loan losses for the years ended December 31, is as follows: (Dollars in Thousands) 2007 2006 2005 Balance, Beginning of Year $ 17,217 $ 17,410 $ 16,037 Acquired Reserves - - 1,385 Provision for Loan Losses 6,163 1,959 2,507 Recoveries on Loans Previously Charged-Off 1,903 1,830 1,724 Loans Charged-Off (7,217) (3,982) (4,243)Balance, End of Year $ 18,066 $ 17,217 $ 17,410

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Impaired Loans. Selected information pertaining to impaired loans, at December 31, is as follows: 2007 2006

(Dollars in Thousands) Valuation Balance

Valuation Allowance

Valuation Balance

Valuation Allowance

Impaired Loans: With Related Credit Allowance $ 21,615 $ 4,702 $ 6,085 $ 2,255 Without Related Credit Allowance 15,019 - 4,574 - (Dollars in Thousands) 2007 2006 2005 Average Recorded Investment in Impaired Loans $ 23,922 $ 12,782 $ 9,786 Interest Income on Impaired Loans

Recognized $ 761 $ 398 $ 218 Collected in Cash 761 398 218

Interest payments received on impaired loans are recorded as interest income unless collection of the remaining recorded investment is doubtful, at which time payments received are recorded as reduction of principal. Note 5 INTANGIBLE ASSETS The Company had intangible assets of $98.6 million and $104.4 million at December 31, 2007 and December 31, 2006, respectively. Intangible assets at December 31, were as follows: 2007 2006

(Dollars in Thousands) Gross Amount

AccumulatedAmortization

Gross Amount

AccumulatedAmortization

Core Deposits Intangibles $ 47,176 $ 34,598 $ 47,176 $ 28,955 Goodwill 84,811 - 84,811 - Customer Relationship Intangible 1,867 688 1,867 497Non-Compete Agreement 537 537 537 537

Total Intangible Assets $ 134,391 $ 35,823 $ 134,391 $ 29,989 Net Core Deposit Intangibles. As of December 31, 2007 and December 31, 2006, the Company had net core deposit intangibles of $12.6 million and $18.2 million, respectively. Amortization expense for the twelve months of 2007, 2006 and 2005 was $5.6 million, $5.6 million, and $5.0 million, respectively. The estimated annual amortization expense (in millions) for the next five years is expected to be approximately $5.5, $3.9, $3.9, $2.4, and $0.6 per year. Goodwill. As of December 31, 2007 and December 31, 2006, the Company had goodwill of $84.8 million. Goodwill is the Company's only intangible asset that is no longer subject to amortization under the provisions of SFAS 142. On December 31, 2007, the Company performed its annual impairment review and concluded that no impairment adjustment was necessary. Other. As of December 31, 2007, the Company had a client relationship intangible, net of accumulated amortization, of $1.2 million. This intangible was booked as a result of the March 2004 acquisition of trust client relationships from Synovus Trust Company. Amortization expense for 2007 was $191,000. Estimated annual amortization expense is $191,000 based on use of a 10-year useful life. The Company also had a non-compete intangible during 2006 which became fully amortized at the end of 2006. This intangible was booked as a result of the October 2004 acquisition of Farmers and Merchants Bank of Dublin. Amortization expense for this intangible during 2006 was $250,000.

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Note 6 PREMISES AND EQUIPMENT The composition of the Company's premises and equipment at December 31, was as follows: (Dollars in Thousands) 2007 2006 Land $ 22,722 $ 22,597 Buildings 90,335 78,676 Fixtures and Equipment 55,783 52,129

Total 168,840 153,402 Accumulated Depreciation (70,228) (66,864)Premises and Equipment, Net $ 98,612 $ 86,538

Note 7 DEPOSITS Interest bearing deposits, by category, as of December 31, were as follows: (Dollars in Thousands) 2007 2006 NOW Accounts $ 744,093 $ 599,433 Money Market Accounts 386,619 384,568 Savings Accounts 111,600 125,500 Time Deposits 467,373 482,139

Total $ 1,709,685 $ 1,591,640 At December 31, 2007 and 2006, $5.6 million and $3.1 million, respectively, in overdrawn deposit accounts were reclassified as loans. Deposits from certain directors, executive officers, and their related interests totaled $47.6 million and $30.7 million at December 31, 2007 and 2006, respectively. Time deposits in denominations of $100,000 or more totaled $129.7 million and $135.0 million at December 31, 2007 and December 31, 2006, respectively. At December 31, 2007, the scheduled maturities of time deposits were as follows: (Dollars in Thousands) 2008 $ 408,041 2009 43,277 2010 11,205 2011 2,619 2012 and thereafter 2,231

Total $ 467,373

Interest expense on deposits for the three years ended December 31, was as follows: (Dollars in Thousands) 2007 2006 2005 NOW Accounts $ 10,748 $ 7,658 $ 2,868 Money Market Accounts 13,666 11,687 4,337 Savings Accounts 280 278 292 Time Deposits < $100,000 13,990 12,087 9,247 Time Deposits > $100,000 6,003 5,543 4,390

Total $ 44,687 $ 37,253 $ 21,134

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Note 8 SHORT-TERM BORROWINGS Short-term borrowings included the following:

(Dollars in Thousands)

Federal Funds

Purchased

Securities Sold Under Repurchase Agreements

Other Short-Term Borrowings

2007 Balance at December 31, $ 7,550 $ 32,806 $ 12,775(1) Maximum indebtedness at any month end 26,400 47,047 13,664 Daily average indebtedness outstanding 15,812 38,683 11,902 Average rate paid for the year 4.89% 4.11% 4.17%Average rate paid on period-end borrowings 2.47% 3.32% 4.29% 2006 Balance at December 31, $ 11,950 $ 38,022 $ 15,051(1) Maximum indebtedness at any month end 39,225 55,321 34,738 Daily average indebtedness outstanding 16,645 34,335 27,720 Average rate paid for the year 4.82% 3.79% 3.47%Average rate paid on period-end borrowings 4.61% 3.79% 3.90% 2005 Balance at December 31, $ 11,925 $ 38,702 $ 32,346 Maximum indebtedness at any month end 26,825 65,206 67,122 Daily average indebtedness outstanding 31,644 39,784 26,435 Average rate paid for the year 3.36% 2.30% 3.32%Average rate paid on period-end borrowings 3.88% 3.21% 3.48% (1) Includes FHLB debt and TT&L (client tax deposits) balance of $12.2 million and $0.6 million, respectively at December 31,

2007 and $13.0 million and $2.0 million, respectively at December 31, 2006.

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Note 9 LONG-TERM BORROWINGS Federal Home Loan Bank Notes. At December 31, Federal Home Loan Bank advances included: (Dollars in Thousands) 2007 2006

Due on February 13, 2007, fixed rate of 3.05%(1) - 3,000 Due on April 24, 2007, fixed rate of 7.30%(1) - 23 Due on September 10, 2007, fixed rate of 4.29%(1) - 10,000 Due on May 30, 2008, fixed rate of 2.50%(1) 21 61 Due on June 13, 2008, fixed rate of 5.40%(1) 72 214 Due on September 8, 2008, fixed rate of 4.32%(1) 10,000 10,000 Due on November 10, 2008, fixed rate of 4.12%(1) 2,105 2,189 Due on October 19, 2009, fixed rate of 3.69% 302 470 Due on November 10, 2010, fixed rate of 4.72% 695 722 Due on December 31, 2010, fixed rate of 3.85% 524 699 Due on December 18, 2012, fixed rate of 4.84% 542 566 Due on March 18, 2013, fixed rate of 6.37% 499 571 Due on June 17, 2013, fixed rate of 3.53% 692 793 Due on June 17, 2013, fixed rate of 3.85% 85 89 Due on June 17, 2013, fixed rate of 4.11% 1,660 1,720 Due on September 23, 2013, fixed rate of 5.64% 727 824 Due on January 26, 2014, fixed rate of 5.79% 1,131 Due on January 27, 2014, fixed rate of 5.79% 1,641 1,191 Due on March 10, 2014, fixed rate of 4.21% 505 571 Due on May 27, 2014, fixed rate of 5.92% 386 435 Due on June 2, 2014, fixed rate of 4.52% 2,726 3,078 Due on July 20, 2016, fixed rate of 6.27% 1,016 1,134 Due on October 3, 2016, fixed rate of 5.41% 265 295 Due on October 31, 2016, fixed rate of 5.16% 589 656 Due on June 27, 2017, fixed rate of 5.53% 665 735 Due on October 31, 2017, fixed rate of 4.79% 819 903 Due on December 11, 2017, fixed rate of 4.78% 728 802 Due on February 26, 2018, fixed rate of 4.36% 1,735 1,906 Due on September 18, 2018, fixed rate of 5.15% 516 564 Due on November 5, 2018, fixed rate of 5.10% 3,364 3,499 Due on December 3, 2018, fixed rate of 4.87% 541 590 Due on December 17, 2018, fixed rate of 6.33% 1,401 1,486 Due on December 24, 2018, fixed rate of 6.29% - 681 Due on February 16, 2021, fixed rate of 3.00% 776 814 Due on January 18, 2022, fixed rate of 5.25% 1,033 3,250 Due on May 30, 2023, fixed rate of 2.50% 896 933

Total Outstanding $ 38,657 $ 55,464

(1) $12.2 million is classified as short-term borrowings. The contractual maturities of FHLB debt for the five years subsequent to December 31, 2007, are as follows: (Dollars in Thousands) 2008 $ 14,604 (1)

2009 2,465 2010 3,028 2011 2,322 2012 2,835 2013 and thereafter 13,403 Total $ 38,657

(1) $12.2 million is classified as short-term borrowings.

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The FHLB advances are collateralized by a blanket floating lien on all 1-4 family residential mortgage loans, commercial real estate mortgage loans, and home equity mortgage loans. Interest on the FHLB advances is paid on a monthly basis. Repurchase Agreements - Term. At December 31, the Company maintained one long-term repurchase agreement for $0.3 million collateralized by bank-owned securities. The agreement has a stated maturity of January 2009. Interest is payable upon maturity. Junior Subordinated Deferrable Interest Notes. The Company has issued two junior subordinated deferrable interest notes to wholly owned Delaware statutory trusts. The first note for $30.9 million was issued to CCBG Capital Trust I. The second note for $32.0 million was issued to CCBG Capital Trust II. The two trusts are considered variable interest entities for which the Company is not the primary beneficiary. Accordingly, the accounts of the trusts are not included in the Company’s consolidated financial statements. See Note 1 - Summary of Significant Accounting Policies for additional information about the Company’s consolidation policy. Details of the Company’s transaction with the two trusts are provided below. In November 2004, CCBG Capital Trust I issued $30.0 million of trust preferred securities which represent beneficial interest in the assets of the trust. The interest rate is fixed at 5.71% for a period of five years, then adjustable annually to LIBOR plus a margin of 1.90%. The trust preferred securities will mature on December 31, 2034, and are redeemable upon approval of the Federal Reserve in whole or in part at the option of the Company at any time after December 31, 2009 and in whole at any time upon occurrence of certain events affecting their tax or regulatory capital treatment. Distributions on the trust preferred securities are payable quarterly on March 31, June 30, September 30, and December 31 of each year. CCBG Capital Trust I also issued $928,000 of common equity securities to CCBG. The proceeds of the offering of trust preferred securities and common equity securities were used to purchase a $30.9 million junior subordinated deferrable interest note issued by the Company, which has terms substantially similar to the trust preferred securities. In May 2005, CCBG Capital Trust II issued $31.0 million of trust preferred securities which represent beneficial interest in the assets of the trust. The interest rate is fixed at 6.07% for a period of five years, then adjustable quarterly to LIBOR plus a margin of 1.80%. The trust preferred securities will mature on June 15, 2035, and are redeemable upon approval of the Federal Reserve in whole or in part at the option of the Company at any time after May 20, 2010 and in whole at any time upon occurrence of certain events affecting their tax or regulatory capital treatment. Distributions on the trust preferred securities are payable quarterly on March 15, June 15, September 15, and December 15 of each year. CCBG Capital Trust II also issued $959,000 of common equity securities to CCBG. The proceeds of the offering of trust preferred securities and common equity securities were used to purchase a $32.0 million junior subordinated deferrable interest note issued by the Company, which has terms substantially similar to the trust preferred securities. The Company has the right to defer payments of interest on the two notes at any time or from time to time for a period of up to twenty consecutive quarterly interest payment periods. Under the terms of each note, in the event that under certain circumstances there is an event of default under the note or the Company has elected to defer interest on the note, the Company may not, with certain exceptions, declare or pay any dividends or distributions on its capital stock or purchase or acquire any of its capital stock. The Company is current on the interest payment obligations and has not executed the right to defer interest payments on the notes. The Company has entered into agreements to guarantee the payments of distributions on the trust preferred securities and payments of redemption of the trust preferred securities. Under these agreements, the Company also agrees, on a subordinated basis, to pay expenses and liabilities of the two trusts other than those arising under the trust preferred securities. The obligations of the Company under the two junior subordinated notes, the trust agreements establishing the two trusts, the guarantee and agreement as to expenses and liabilities, in aggregate, constitute a full and conditional guarantee by the Company of the two trusts' obligations under the two trust preferred security issuances. Despite the fact that the accounts of CCBG Capital Trust I and CCBG Capital Trust II are not included in the Company’s consolidated financial statements, the $30.0 million and $31.0 million, respectively, in trust preferred securities issued by these subsidiary trusts are included in the Tier I Capital of Capital City Bank Group, Inc. as allowed by Federal Reserve guidelines.

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Note 10 INCOME TAXES The provision for income taxes reflected in the statements of income is comprised of the following components: (Dollars in Thousands) 2007 2006 2005 Current:

Federal $ 13,603 $ 14,780 $ 15,114 State 280 1,527 1,290

Deferred: Federal (32) 1,384 156 State (148) 230 26

Total $ 13,703 $ 17,921 $ 16,586

Income taxes provided were different than the tax expense computed by applying the statutory federal income tax rate of 35% to pre-tax income as a result of the following: (Dollars in Thousands) 2007 2006 2005 Tax Expense at Federal Statutory Rate $ 15,185 $ 17,915 $ 16,403 Increases (Decreases) Resulting From:

Tax-Exempt Interest Income (1,630) (1,334) (1,054) State Taxes, Net of Federal Benefit 86 1,142 856 Other 62 198 381

Actual Tax Expense $ 13,703 $ 17,921 $ 16,586

Deferred income tax liabilities and assets result from differences between assets and liabilities measured for financial reporting purposes and for income tax return purposes. These assets and liabilities are measured using the enacted tax rates and laws that are currently in effect. The net deferred tax asset and the temporary differences comprising that balance at December 31, 2007 and 2006 are as follows: (Dollars in Thousands) 2007 2006 Deferred Tax Assets attributable to:

Allowance for Loan Losses $ 7,110 $ 6,659 Associate Benefits 510 700 Unrealized Losses on Investment Securities - 503 Accrued Pension/SERP 3,964 4,795 Interest on Nonperforming Loans 603 170 State Net Operating Loss Carry Forwards 511 399 Intangible Assets 95 70 Core Deposit Intangible 1,360 278 Contingency Reserve 746 - Accrued Expense 611 612 Leases 464 449 Other 517 386

Total Deferred Tax Assets $ 16,491 $ 15,021 Deferred Tax Liabilities attributable to:

Depreciation on Premises and Equipment $ 3,290 $ 4,434 Deferred Loan Fees and Costs 3,887 2,550 Unrealized Gains on Investment Securities 113 - Intangible Assets 1,619 1,319 Accrued Pension/SERP 4,669 2,321 Securities Accretion 25 25 Market Value on Loans Held for Sale 59 122 Other 68 223

Total Deferred Tax Liabilities 13,730 10,994 Net Deferred Tax Assets $ 2,761 $ 4,027

In the opinion of management, it is more likely than not that all of the deferred tax assets will be realized; therefore, a valuation allowance is not required. At year-end 2007, the Company had state net operating loss carry-forwards of approximately $14.0 million which expire at various dates from 2022 through 2027.

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Changes in net deferred income tax assets were: (Dollars in Thousands) 2007 2006 Balance at Beginning of Year $ 4,027 $ 380 Change in Accounting Method – Adoption of SFAS No. 158 and SAB No. 108 - 5,463 Income Tax Expense From Change in Pension Liability (830) - Income Tax Expense From Change in Unrealized Losses on Available-for-Sale

Securities (616) (202) Deferred Income Tax Expense on Continuing Operations 180 (1,614) Balance at End of Year $ 2,761 $ 4,027

The Company adopted the provisions of FASB Interpretation No. 48, "Accounting for Income Tax Uncertainties" ("FIN 48"), on January 1, 2007. There was no material effect on its financial condition or results of operations as a result of implementing FIN 48. The Company had unrecognized tax benefits at January 1, 2007 and December 31, 2007 of $2.0 million and $3.3 million, respectively, of which $2.2 million would increase income from continuing operations, and thus impact the Company’s effective tax rate, if ultimately recognized into income. A reconciliation of the beginning and ending unrecognized tax benefit is as follows: (Dollars in Thousands) 2007 Balance at January 1, 2007 $ 2,021 Addition Based on Tax Positions Related to Prior Years 252 Addition Based on Tax Positions Related to Current Years 981 Balance at December 31, 2007 $ 3,254

It is the Company’s policy to recognize interest and penalties accrued relative to unrecognized tax benefits in their respective federal or state income tax accounts. The total amount of interest and penalties recorded in the income statement for the year ended December 31, 2007 was $409,000, and the amount accrued for penalties and interest at December 31, 2007 was $553,000. The Company and its subsidiaries file a consolidated U.S. federal income tax return, as well as filing various returns in states where the Company is doing business. The Company is no longer subject to U.S. federal or state tax examinations for years before 2004. No material change to the Company’s unrecognized tax positions is expected over the next 12 months.

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Note 11 STOCK-BASED COMPENSATION In accordance with the Company’s adoption of SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), in the first quarter of 2003, the cost related to stock-based associate compensation included in net income has been accounted for under the fair value method in all reported periods. On January 1, 2006, the Company adopted SFAS 123R “Share-Based Payment” (Revised). The Company continues to include the cost of its share-based compensation plans in net income under the fair value method. As of December 31, 2007, the Company had four stock-based compensation plans, consisting of the 2005 Associate Incentive Plan ("AIP"), the 2005 Associate Stock Purchase Plan ("ASPP"), the 2005 Director Stock Purchase Plan ("DSPP"), and the 2011 Incentive Plan (“2011 Plan”). Total compensation expense associated with these plans for years 2005 through 2007 was approximately $0.8 million, $1.2 million, and $0.2 million, respectively. AIP. The Company's AIP allows the Company's Board of Directors to award key associates various forms of equity-based incentive compensation. Under the AIP, the Company adopted the Stock-Based Incentive Plan (the "Incentive Plan"), effective January 1, 2006, which is a performance-based equity bonus plan for selected members of management, including all executive officers. Under the Incentive Plan, all participants are eligible to earn performance shares, payable in the form of restricted stock, on an annual basis. Annual awards are tied to an internally established annual earnings target. The grant-date fair value of an annual compensation award is approximately $1.5 million. In addition, each plan participant is eligible to receive from the Company a tax supplement bonus equal to 31% of the stock award value at the time of issuance. A total of 43,437 shares are eligible for issuance annually. At the end of each calendar year, the Compensation Committee of the Company’s Board of Directors will confirm whether the performance goals have been met prior to the payout of any awards. Any performance shares earned under the Incentive Plan will be issued in the calendar quarter following the calendar year in which the shares were earned. A total of 32,799 shares were issued under this plan during the first quarter of 2007 related to the 2006 award. The Company did not recognize any expense for the year 2007 related to the Incentive Plan as the Company’s performance did not achieve the earnings performance goal. The Company recognized expense of $1.1 million in 2006 for the Incentive Plan. Under a substantially similar predecessor plan, the Company recognized expense of $0.6 million in 2005. A total of 875,000 shares of common stock have been reserved for issuance under the AIP. To date, the Company has issued 60,892 shares of common stock under the AIP. Executive Stock Option Agreement. In 2006 and 2005, under the provisions of the AIP, the Company's Board of Directors approved stock option agreements for a key executive officer (William G. Smith, Jr. - Chairman, President and CEO, CCBG). Similar stock option agreements were approved in 2004 and 2003. These agreements grant a non-qualified stock option award upon achieving certain annual earnings per share conditions set by the Board, subject to certain vesting requirements. The options granted under the agreements have a term of ten years and vest at a rate of one-third on each of the first, second, and third anniversaries of the date of grant. Under the 2004 and 2003 agreements, 37,246 and 23,138 options, respectively, were issued, none of which have been exercised. The fair value of a 2004 option was $13.42, and the fair value of a 2003 option was $11.64. The exercise prices for the 2004 and 2003 options are $32.69 and $32.96, respectively. Under the 2006 and 2005 agreements, the earnings per share conditions were not met; therefore, no expense was recognized related to these agreements. In accordance with the provisions of SFAS 123R and SFAS 123, the Company recognized expenses in 2005 through 2007 of approximately $193,000, $205,000, and $125,000, respectively, related to the 2004 and 2003 agreements. In 2007, the Company replaced its practice of entering into a stock option arrangement by establishing a Performance Share Unit Plan under the provisions of the AIP that allows the executive to earn shares based on the compound annual growth rate in diluted earnings per share over a three-year period. The details of this program for the executive are outlined in a Form 8-K filing dated January 31, 2007. No expense related to this plan was recognized in 2007 as results fell short of the earnings performance goal. A summary of the status of the Company’s option shares as of December 31, 2007 is presented below:

Options Shares

Weighted-Average

Exercise Price

Weighted-Average Remaining

Contractual Term

Aggregate

Intrinsic Value Outstanding at January 1, 2007 60,384 $ 32.79 $ 7.9 $ 151,355 Granted - - - - Exercised - - - - Forfeited or expired - - - - Outstanding at December 31, 2007 60,384 $ 32.79 $ 6.9 $ - Exercisable at December 31, 2007 47,720 $ 32.79 $ 6.9 $ -

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DSPP. The Company's DSPP allows the directors to purchase the Company's common stock at a price equal to 90% of the closing price on the date of purchase. Stock purchases under the DSPP are limited to the amount of the directors' annual retainer and meeting fees. The DSPP has 93,750 shares reserved for issuance. A total of 30,866 shares have been issued since the inception of the DSPP. For 2007, the Company issued 12,128 shares under the DSPP and recognized approximately $33,000 in expense related to this plan. For 2006, the Company issued 12,149 shares and recognized approximately $37,000 in expense related to the DSPP. For 2005, the Company issued 6,589 shares and recognized approximately $26,000 in expense under the DSPP. ASPP. Under the Company's ASPP, substantially all associates may purchase the Company's common stock through payroll deductions at a price equal to 90% of the lower of the fair market value at the beginning or end of each six-month offering period. Stock purchases under the ASPP are limited to 10% of an associate's eligible compensation, up to a maximum of $25,000 (fair market value on each enrollment date) in any plan year. Shares are issued at the beginning of the quarter following each six-month offering period. The ASPP has 593,750 shares of common stock reserved for issuance. A total of 59,812 shares have been issued since inception of the ASPP. For 2007, the Company issued 23,531 shares under the ASPP and recognized approximately $102,000 in expense related to this plan. For 2006, the Company issued 19,435 shares and recognized approximately $90,000 in expense related to the ASPP. For 2005, the Company issued 16,846 shares and recognized approximately $90,000 in expense under the ASPP. Based on the Black-Scholes option pricing model, the weighted average estimated fair value of each of the purchase rights granted under the ASPP Plan was $5.82 for 2007. For 2006 and 2005, the weighted average fair value purchase right granted was $5.65 and $5.77, respectively. In calculating compensation, the fair value of each stock purchase right was estimated on the date of grant using the following weighted average assumptions:

2007 2006 2005 Dividend yield 2.1% 1.9% 1.9% Expected volatility 25.5% 23.5% 28.0% Risk-free interest rate 4.8% 4.5% 2.6% Expected life (in years) 0.5 0.5 0.5

2011Incentive Plan. The Company's 2011 Incentive Plan was adopted by the Company in January 2004 and provides each associate an award (cash, equity or combination cash/equity) of $2,010 if the Company achieves a certain internally established earnings target. Under the 2011 Incentive Plan, the associate is required to be employed by the Company at the time the goal is achieved. Associates not employed by the company (i.e. new associates) at the time of the grant, are provided a pro-rated award amount depending on their length of service. The expense associated with the equity portion of this plan for the years 2005-2007 was approximately $131,000, $189,000, and $113,000, respectively. The expense for the cash portion of this plan for the same periods was approximately $165,000, $234,000, and $113,000, respectively. Subsequent Event (unaudited). On February 15, 2008, the Company issued a Form 8-K announcing it was terminating its 2011 initiative due to determination that the Company would not, based on current economic conditions, be able to achieve its earnings growth goal. As a result, the Company terminated its 2011 Incentive Plan and approximately $440,000 in expense accrual related to this incentive plan will be reversed in the first quarter of 2008. The Company plans to replace the 2011 Incentive Plan with a new plan containing internal goals that are appropriate for the current market environment. Note 12 EMPLOYEE BENEFIT PLANS Pension Plan The Company sponsors a noncontributory pension plan covering substantially all of its associates. Benefits under this plan generally are based on the associate's years of service and compensation during the years immediately preceding retirement. The Company's general funding policy is to contribute amounts deductible for federal income tax purposes. The defined benefit pension plan for Farmers and Merchants Bank of Dublin was merged into the Company's pension plan as of December 31, 2005. The following table details on a consolidated basis the components of pension expense, the funded status of the plan, amounts recognized in the Company's consolidated statements of financial condition, and major assumptions used to determine these amounts.

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(Dollars in Thousands) 2007 2006 2005 Change in Projected Benefit Obligation:

Benefit Obligation at Beginning of Year $ 68,671 $ 64,131 $ 54,529 Service Cost 4,903 4,930 4,352 Interest Cost 3,967 3,622 3,253 Actuarial (Gain)/Loss (1,420) (1,421) 2,752 Benefits Paid (5,759) (3,267) (3,501) Expenses Paid (244) (149) (75) Plan Change - 825 - Acquisitions - - 2,821

Projected Benefit Obligation at End of Year $ 70,118 $ 68,671 $ 64,131

Accumulated Benefit Obligation at End of Year $ 51,256 $ 49,335 $ 45,645

Change in Plan Assets:

Fair Value of Plan Assets at Beginning of Year $ 66,554 $ 52,277 $ 41,125 Actual Return on Plan Assets 3,602 6,342 1,737 Employer Contributions 11,500 11,350 10,500 Benefits Paid (5,759) (3,267) (3,501) Expenses Paid (244) (149) (75) Acquisitions - - 2,491

Fair Value of Plan Assets at End of Year $ 75,653 $ 66,553 $ 52,277 Reconciliation of Funded Status:

Funded Status $ * $ * $ (11,853) Unrecognized Net Actuarial Losses * * 14,823 Unrecognized Prior Service Cost * * 1,302

Prepaid (Accrued) Benefit Cost $ * $ * $ 4,272

Amounts Recognized in the Consolidated Statements of Financial Condition:

Other Assets $ 5,535 $ - $ * Other Liabilities - 2,117 *

Amounts (Pre-Tax) Recognized in Accumulated Other Comprehensive Income:

Net Actuarial Losses $ 8,622 $ 9,601 $ * Prior Service Cost 1,611 1,912 *

*Not Applicable due to adoption of SFAS No. 158 effective 12/31/2006 Components of Net Periodic Benefit Costs:

Service Cost $ 4,903 $ 4,930 $ 4,352 Interest Cost 3,967 3,622 3,410 Expected Return on Plan Assets (5,083) (4,046) (3,373) Amortization of Prior Service Costs 301 215 215 Transition Obligation Recognition - - 11 Recognized Net Actuarial Loss 1,039 1,598 1,324

Net Periodic Benefit Cost $ 5,127 $ 6,319 $ 5,939

Assumptions:

Weighted-average used to determine benefit obligations: Discount Rate 6.25% 6.00% 5.75%Expected Return on Plan Assets 8.00% 8.00% 8.00%Rate of Compensation Increase 5.50% 5.50% 5.50%Measurement Date 12/31/07 12/31/06 12/31/05

Weighted-average used to determine net cost:

Discount Rate 6.00% 5.75% 6.00%Expected Return on Plan Assets 8.00% 8.00% 8.00%Rate of Compensation Increase 5.50% 5.50% 5.50%

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Other Comprehensive Income. The estimated amounts (dollars in thousands) that will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2008 are as follows: Actuarial Loss $ 890Prior Service Cost 301 $ 1,191 Return on Plan Assets. The overall expected long-term rate of return on assets is a weighted-average expectation for the return on plan assets. The Company considers historical performance and current benchmarks to arrive at expected long-term rates of return in each asset category. The Company assumed that 65% of its portfolio would be invested in equity securities, with the remainder invested in debt securities. Plan Assets. The Company’s pension plan asset allocation at year-end 2007 and 2006, and the target asset allocation for 2008 are as follows:

Target AllocationPercentage of Plan

Assets at Year-End(1) 2008 2007 2006 Equity Securities 65% 58% 55% Debt Securities 30% 27% 18% Real Estate - - 1% Cash Equivalent 5% 15% 26%

Total 100% 100% 100% (1) Represents asset allocation at year-end which may differ from the average target allocation for the year due to the year-end

cash contribution to the plan. The Company’s pension plan assets are overseen by the CCBG Retirement Committee. Capital City Trust Company acts as the investment manager for the plan. The investment strategy is to maximize return on investments while minimizing risk. The Company believes the best way to accomplish this goal is to take a conservative approach to its investment strategy by investing in high-grade equity and debt securities. Expected Benefit Payments. As of December 31, 2007, expected benefit payments related to the Company's defined benefit pension plan were as follows: 2008 $ 3,803,0912009 3,776,8192010 3,715,5342011 4,563,9012012 5,547,4762013 through 2017 36,465,818 $ 57,872,639

Contributions. The following table details the amounts contributed to the pension plan in 2007 and 2006, and the expected amount to be contributed in 2008.

2007 2006 Expected 2008(1)

Actual Contributions $ 11,500,000 $ 11,350,000 $ 10,000,000 (1) Estimate of 2008 maximum allowable contribution.

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Supplemental Executive Retirement Plan The Company has a Supplemental Executive Retirement Plan ("SERP") covering selected executive officers. Benefits under this plan generally are based on the executive officer's years of service and compensation during the years immediately preceding retirement. The following table details the components of the SERP’s periodic benefit cost, the funded status of the plan, amounts recognized in the Company's consolidated statements of financial condition, and major assumptions used to determine these amounts. (Dollars in Thousands) 2007 2006 2005 Change in Projected Benefit Obligation:

Benefit Obligation at Beginning of Year $ 4,018 $ 3,878 $ 3,601 Service Cost 83 123 133 Interest Cost 208 230 207 Actuarial (Gain) Loss (603) 62 (63) Plan Change - (274) -

Projected Benefit Obligation at End of Year $ 3,706 $ 4,019 $ 3,878

Accumulated Benefit Obligation at End of Year $ 2,603 $ 2,252 $ 2,295

Reconciliation of Funded Status:

Unfunded Status $ * $ * $ (3,878) Unrecognized Net Actuarial Loss * * 734 Unrecognized Prior Service Cost * * 388

Accrued Benefit Cost $ * $ * $ (2,756)

Amounts Recognized in the Consolidated Statements of Financial Condition:

Other Liabilities $ 3,706 $ 4,019 $ * Amounts (Pre-Tax) Recognized in Accumulated Other Comprehensive Income:

Net Actuarial (Gain) Loss $ 3 $ 608 $ * Prior Service Cost 44 52 *

* Not Applicable due to adoption of SFAS No. 158 effective 12/31/2006 Components of Net Periodic Benefit Costs:

Service Cost $ 83 $ 123 $ 133 Interest Cost 208 230 207 Amortization of Prior Service Cost 7 61 61 Recognized Net Actuarial Loss 8 100 77

Net Periodic Benefit Cost $ 306 $ 514 $ 478

Assumptions: Weighted-average used to determine the benefit obligations:

Discount Rate 6.25% 6.00% 5.75%Rate of Compensation Increase 5.50% 5.50% 5.50%Measurement Date 12/31/07 12/31/06 12/31/05

Weighted-average used to determine the net cost:

Discount Rate 6.00% 5.75% 6.00%Rate of Compensation Increase 5.50% 5.50% 5.50%

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Expected Benefit Payments. As of December 31, 2007, expected benefit payments related to the Company's SERP were as follows: 2008 $ 87,4682009 187,4692010 230,2382011 300,8652012 366,8402013 through 2017 2,950,973 $ 4,123,853

401(k) Plan The Company has a 401(k) Plan which enables associates to defer a portion of their salary on a pre-tax basis. The plan covers substantially all associates of the Company who meet minimum age requirements. The plan is designed to enable participants to elect to have an amount from 1% to 15% of their compensation withheld in any plan year placed in the 401(k) Plan trust account. Matching contributions from the Company are made up to 6% of the participant's compensation for eligible associates. During 2007, 2006, and 2005, the Company made matching contributions of $299,000, $273,000 and $154,000, respectively. The participant may choose to invest their contributions into sixteen investment funds available to 401(k) participants, including the Company’s common stock. A total of 50,000 shares of CCBG common stock have been reserved for issuance. These shares have historically been purchased in the open market. Other Plans The Company has a Dividend Reinvestment and Optional Stock Purchase Plan. A total of 250,000 shares have been reserved for issuance. In recent years, shares for the Dividend Reinvestment and Optional Stock Purchase Plan have been acquired in the open market and, thus, the Company did not issue any shares under this plan in 2007, 2006 and 2005. Note 13 EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share: (Dollars in Thousands, Except Per Share Data) 2007 2006 2005 Numerator:

Net Income $ 29,683 $ 33,265 $ 30,281

Denominator:

Denominator for Basic Earnings Per Share Weighted-Average Shares 17,909,396 18,584,519 18,263,855 Effects of Dilutive Securities Stock Compensation Plans 2,191 25,320 17,388

Denominator for Diluted Earnings Per Share Adjusted Weighted-

Average Shares and Assumed Conversions 17,911,587 18,609,839 18,281,243

Basic Earnings Per Share $ 1.66 $ 1.79 $ 1.66

Diluted Earnings per Share $ 1.66 $ 1.79 $ 1.66

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Note 14 CAPITAL The Company is subject to various regulatory capital requirements which involve quantitative measures of the Company's assets, liabilities and certain off-balance sheet items. The Company's capital amounts and classification are subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require that the Company maintain amounts and ratios (set forth in the table below) of total and Tier I Capital to risk-weighted assets, and of Tier I Capital to average assets. As of December 31, 2007, the Company met all capital adequacy requirements to which it is subject. A summary of actual, required, and capital levels necessary to be considered well-capitalized for Capital City Bank Group, Inc. consolidated and its banking subsidiary, Capital City Bank, as of December 31, 2007 and December 31, 2006 are as follows:

Actual

Required For Capital

Adequacy Purposes

To Be Well- Capitalized Under Prompt Corrective Action Provisions

(Dollars in Thousands) Amount Ratio Amount Ratio Amount Ratio As of December 31, 2007: Tier I Capital:

CCBG $ 261,172 13.05% $ 80,047 4.00% * * CCB 260,720 13.05% 79,934 4.00% 119,901 6.00%

Total Capital:

CCBG 281,125 14.05% 160,094 8.00% * * CCB 278,787 13.95% 159,868 8.00% 199,835 10.00%

Tier I Leverage:

CCBG 261,172 10.41% 80,047 4.00% * * CCB 260,720 10.42% 79,934 4.00% 99,917 5.00%

As of December 31, 2006: Tier I Capital:

CCBG $ 280,679 14.00% $ 80,191 4.00% * * CCB 273,425 13.66% 80,055 4.00% 120,082 6.00%

Total Capital:

CCBG 299,783 14.95% 160,382 8.00% * * CCB 290,642 14.52% 160,109 8.00% 200,137 10.00%

Tier I Leverage:

CCBG 280,679 11.30% 80,191 4.00% * * CCB 273,425 11.03% 80,055 4.00% 100,068 5.00%

*Not applicable to bank holding companies. Note 15 DIVIDEND RESTRICTIONS Substantially all the Company’s retained earnings are undistributed earnings of its banking subsidiary which are restricted by various regulations administered by federal and state bank regulatory authorities. The approval of the appropriate regulatory authority is required if the total of all dividends declared by a subsidiary bank in any calendar year exceeds the bank’s net profits (as defined under Florida law) for that year combined with its retained net profits for the preceding two calendar years. In 2008, the bank subsidiary may declare dividends without regulatory approval of an amount equal to the net profits of the Company’s subsidiary bank for 2008 up to the date of any such dividend declaration.

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Note 16 RELATED PARTY INFORMATION Related Party Loans. At December 31, 2007 and 2006, certain officers and directors were indebted to the Company’s bank subsidiary in the aggregate amount of $9.1 million and $12.6 million, respectively. During 2007, $6.2 million in new loans were made and repayments totaled $9.7 million. In the opinion of management, these loans were made on similar terms as loans to other individuals of comparable creditworthiness and were all current at year-end. Note 17 SUPPLEMENTARY INFORMATION Components of other noninterest income and noninterest expense in excess of 1% of the sum of total interest income and noninterest income, which are not disclosed separately elsewhere, are presented below for each of the respective years. (Dollars in Thousands) 2007 2006 2005 Noninterest Income:

Merchant Fee Income $ 7,257 $ 6,978 $ 6,174 Interchange Commission Fees 3,757 3,105 2,239 ATM/Debit Card Fees 2,692 2,519 2,206(1)

Noninterest Expense: Professional Fees 3,855 3,402 3,825 Interchange Service Fees 6,118 6,010 5,402 Telephone 2,373 2,323 2,493 Advertising 3,742 4,285 4,275 Printing & Supplies 2,124(1) 2,472 2,372

(1) <1% of appropriate threshold.

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Note 18 COMMITMENTS AND CONTINGENCIES Lending Commitments. The Company is a party to financial instruments with off-balance sheet risks in the normal course of business to meet the financing needs of its clients. These financial instruments consist of commitments to extend credit and standby letters of credit. The Company’s maximum exposure to credit loss under standby letters of credit and commitments to extend credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in establishing commitments and issuing letters of credit as it does for on-balance sheet instruments. As of December 31, 2007, the amounts associated with the Company’s off-balance sheet obligations were as follows: (Dollars in Thousands) Amount Commitments to Extend Credit(1) $ 437,806 Standby Letters of Credit $ 17,385 (1) Commitments include unfunded loans, revolving lines of credit, and other unused commitments. Commitments to extend credit are agreements to lend to a client so long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a client to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities. In general, management does not anticipate any material losses as a result of participating in these types of transactions. However, any potential losses arising from such transactions are reserved for in the same manner as management reserves for its other credit facilities. For both on- and off-balance sheet financial instruments, the Company requires collateral to support such instruments when it is deemed necessary. The Company evaluates each client’s creditworthiness on a case-by-case basis. The amount of collateral obtained upon extension of credit is based on management’s credit evaluation of the counterparty. Collateral held varies, but may include deposits held in financial institutions; U.S. Treasury securities; other marketable securities; real estate; accounts receivable; property, plant and equipment; and inventory. Other Commitments. In the normal course of business, the Company enters into lease commitments which are classified as operating leases. Rent expense incurred under these leases was approximately $1.5 million in 2007, $1.5 million in 2006, and $1.3 million in 2005. Minimum lease payments under these leases due in each of the five years subsequent to December 31, 2007, are as follows (in millions): 2008, $1.4; 2009, $1.3; 2010, $1.1; 2011, $1.0; 2012, $.4; thereafter, $5.7. Contingencies. The Company is a party to lawsuits and claims arising out of the normal course of business. In management's opinion, there are no known pending claims or litigation, the outcome of which would, individually or in the aggregate, have a material effect on the consolidated results of operations, financial position, or cash flows of the Company. Indemnification Obligation. The Company recorded a charge in its fourth quarter financial statements of approximately $1.9 million, or $0.07 per diluted common share to recognize a contingent liability related to the costs of the judgments and settlements from certain Visa Inc. (“Visa”) related litigation (“Covered Litigation”). Visa U.S.A. believes that its member banks are required to indemnify Visa U.S.A. for potential losses arising from certain Covered Litigation. The Company has been a Visa U.S.A. member for a number of years. Visa has stated in its filings with the SEC that Visa’s escrow account established with a portion of its IPO proceeds will be used to pay the costs of the judgments and settlements from the Covered Litigation. Thus, provided that the escrow account has sufficient funds, the liability recorded on the Company’s books would no longer be required and would be reversed.

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Note 19 FAIR VALUE OF FINANCIAL INSTRUMENTS Many of the Company’s assets and liabilities are short-term financial instruments whose carrying values approximate fair value. These items include Cash and Due From Banks, Interest Bearing Deposits with Other Banks, Federal Funds Sold, Federal Funds Purchased, Securities Sold Under Repurchase Agreements, and Short-Term Borrowings. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. The resulting fair values may be significantly affected by the assumptions used, including the discount rates and estimates of future cash flows. The methods and assumptions used to estimate the fair value of the Company’s other financial instruments are as follows: Investment Securities - Fair values for investment securities are based on quoted market prices. If a quoted market price is not available, fair value is estimated using market prices for similar securities. Loans - The loan portfolio is segregated into categories and the fair value of each loan category is calculated using present value techniques based upon projected cash flows and estimated discount rates. The calculated present values are then reduced by an allocation of the allowance for loan losses against each respective loan category. Deposits - The fair value of Noninterest Bearing Deposits, NOW Accounts, Money Market Accounts and Savings Accounts are the amounts payable on demand at the reporting date. The fair value of fixed maturity certificates of deposit is estimated using present value techniques and rates currently offered for deposits of similar remaining maturities. Subordinated Notes Payable - The fair value of each note is calculated using present value techniques, based upon projected cash flows and estimated discount rates as well as rates being offered for similar obligations. Long-Term Borrowings - The fair value of each note is calculated using present value techniques, based upon projected cash flows and estimated discount rates as well as rates being offered for similar debt. Commitments to Extend Credit and Standby Letters of Credit - The fair value of commitments to extend credit is estimated using the fees currently charged to enter into similar agreements, taking into account the present creditworthiness of the counterparties. The fair value of these fees is not material. The Company’s financial instruments that have estimated fair values are presented below: At December 31, 2007 2006

(Dollars in Thousands) Carrying

Value

Estimated Fair

Value Carrying

Value

Estimated Fair

Value Financial Assets:

Cash $ 93,437 $ 93,437 $ 98,769 $ 98,769 Short-Term Investments 166,260 166,260 78,795 78,795 Investment Securities 190,719 190,719 191,894 191,894 Loans, Net of Allowance for Loan Losses 1,897,784 1,982,661 1,982,504 1,992,025

Total Financial Assets $ 2,348,200 $ 2,433,077 $ 2,351,962 $ 2,361,483

Financial Liabilities:

Deposits $ 2,142,344 $ 2,089,550 $ 2,081,654 $ 2,007,308 Short-Term Borrowings 53,131 53,022 65,023 64,970 Subordinated Notes Payable 62,887 63,371 62,887 63,013 Long-Term Borrowings 26,731 28,284 43,083 42,256

Total Financial Liabilities $ 2,285,093 $ 2,234,227 $ 2,252,647 $ 2,177,547

All non-financial instruments are excluded from the above table. The disclosures also do not include certain intangible assets such as client relationships, deposit base intangibles and goodwill. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

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Note 20 PARENT COMPANY FINANCIAL INFORMATION The operating results of the parent company for the three years ended December 31, are shown below: Parent Company Statements of Income (Dollars in Thousands) 2007 2006 2005 OPERATING INCOME Income Received from Subsidiary Bank:

Dividends $ 49,207 $ 20,166 $ 10,597 Overhead Fees 3,532 3,524 2,716 Other Income 164 112 87

Total Operating Income 52,903 23,802 13,400 OPERATING EXPENSE Salaries and Associate Benefits 1,812 2,360 2,191 Interest on Subordinated Notes Payable 3,730 3,725 2,981 Professional Fees 787 741 1,399 Advertising 260 403 467 Legal Fees 375 604 701 Other 621 649 471

Total Operating Expense 7,585 8,482 8,210 Income Before Income Taxes and Equity in Undistributed Earnings of

Subsidiary Bank 45,318 15,320 5,190 Income Tax Benefit (1,429) (1,835) (2,060)Income Before Equity in Undistributed Earnings of Subsidiary Bank 46,747 17,155 7,250 Equity in Undistributed Earnings of Subsidiary Bank (17,064) 16,110 23,031 Net Income $ 29,683 $ 33,265 $ 30,281

The following are condensed statements of financial condition of the parent company at December 31: Parent Company Statements of Financial Condition (Dollars in Thousands, Except Per Share Data)(1) 2007 2006 ASSETS Cash and Due From Subsidiary Bank $ 958 $ 8,921 Investment in Subsidiary Bank 357,093 373,278 Other Assets 2,826 1,550

Total Assets $ 360,877 $ 383,749

LIABILITIES Subordinated Notes Payable $ 62,887 $ 62,887 Other Liabilities 5,315 5,092

Total Liabilities $ 68,202 $ 67,979 SHAREOWNERS' EQUITY Preferred Stock, $.01 par value, 3,000,000 shares authorized; no shares issued and

outstanding - - Common Stock, $.01 par value; 90,000,000 shares authorized; 17,182,553 and 18,518,398

shares issued and outstanding at December 31, 2007 and December 31, 2006, respectively 172 185 Additional Paid-In Capital 38,243 80,654 Retained Earnings 260,325 243,242 Accumulated Other Comprehensive Loss, Net of Tax (6,065) (8,311)

Total Shareowners' Equity 292,675 315,770 Total Liabilities and Shareowners' Equity $ 360,877 $ 383,749

(1) All share and per share data have been adjusted to reflect the 5-for-4 stock split effective July 1, 2005.

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The cash flows for the parent company for the three years ended December 31, were as follows: Parent Company Statements of Cash Flows (Dollars in Thousands) 2007 2006 2005 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 29,683 $ 33,265 $ 30,281 Adjustments to Reconcile Net Income to Net Cash Provided by Operating

Activities: Equity in Undistributed Earnings of Subsidiary Bank 17,064 (16,110) (23,031)Non-Cash Compensation 238 1,673 110 Increase in Other Assets (152) (670) 131 Increase in Other Liabilities 222 1,976 381 Net Cash Provided by Operating Activities 47,055 20,134 7,872 CASH FLOWS FROM INVESTING ACTIVITIES: Cash Paid for Investment in: Purchase of held-to-maturity and available-for-sale securities (1,000) - - CCBG Capital Trust I and CCBG Capital Trust II - - (959)Cash Paid for Acquisitions - - (29,953)Increase in Investment in Bank Subsidiary 1,466 - - Net Cash Used in Investing Activities 466 - (30,912) CASH FROM FINANCING ACTIVITIES: Proceeds from Subordinated Notes - - 31,959 Payment of Dividends (12,823) (12,322) (11,397)Repurchase of Common Stock (43.233) (5,360) - Issuance of Common Stock 572 1,035 1,019 Net Cash (Used in) Provided by Financing Activities (55,484) (16,647) 21,581 Net Increase (Decrease) in Cash (7,963) 3,487 (1,459)Cash at Beginning of Period 8,921 5,434 6,893 Cash at End of Period $ 958 $ 8,921 $ 5,434

Note 21 COMPREHENSIVE INCOME SFAS No. 130, "Reporting Comprehensive Income," requires that certain transactions and other economic events that bypass the income statement be displayed as other comprehensive income (loss). Total comprehensive income is reported in the accompanying statements of changes in shareowners’ equity. Information related to net comprehensive income (loss) is as follows: (Dollars in Thousands) 2007 2006 2005Other Comprehensive Income (Loss): Securities available for sale: Change in net unrealized gain (loss), net of tax expense (benefit) of

$616, $202, and $(502) $ 1,080 $ 412 $ (893) Retirement plans:

Change in funded status of defined benefit pension plan and SERP plan, net of tax expense of $830 1,166 - -

Net Other Comprehensive Gain (Loss) $ 2,246 $ 412 $ (893) The components of accumulated other comprehensive income, net of tax, as of year-end were as follows: Net unrealized gain (loss) on securities available for sale $ 246 $ (834) $ (1,246) Net unfunded liability for defined benefit pension plan and SERP plan (6,311) (7,477) - $ (6,065) $ (8,311) $ (1,246)

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures. As of December 31, 2007, the end of the period covered by this Annual Report on Form 10-K, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer each concluded that as of December 31, 2007, the end of the period covered by this Annual Report on Form 10-K, we maintained effective disclosure controls and procedures. Management's Report on Internal Control Over Financial Reporting. Our management is responsible for establishing and maintaining effective internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation under the framework in Internal Control - Integrated Framework, our management has concluded we maintained effective internal control over financial reporting, as such term is defined in Securities Exchange Act of 1934 Rule 13a-15(f), as of December 31, 2007. Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting can also be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Management is also responsible for the preparation and fair presentation of the consolidated financial statements and other financial information contained in this report. The accompanying consolidated financial statements were prepared in conformity with U.S. generally accepted accounting principles and include, as necessary, best estimates and judgments by management. Ernst & Young, LLP, an independent registered public accounting firm, has audited our consolidated financial statements as of and for the year ended December 31, 2007, and opined as to the effectiveness of internal control over financial reporting as of December 31, 2007, as stated in its attestation report, which is included herein on page 90. Change in Internal Control. Our management, including the Chief Executive Officer and Chief Financial Officer, has reviewed our internal control. There have been no significant changes in our internal control during our most recently completed fiscal quarter, nor subsequent to the date of their evaluation, that could significantly affect our internal control over financial reporting.

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The Board of Directors and Shareholders of Capital City Bank Group, Inc. We have audited Capital City Bank Group, Inc.’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Capital City Bank Group, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in Management’s Report on the Effectiveness of Internal Control Over Financial Reporting under Item 9A. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Capital City Bank Group, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) the consolidated statement of financial condition of Capital City Bank Group, Inc. and subsidiary as of December 31, 2007, and the related consolidated statements of income, changes in shareowners’ equity, and cash flows for the year ended December 31, 2007 of Capital City Bank Group, Inc. and our report dated March 13, 2008 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP Birmingham, Alabama March 13, 2008

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Item 9B. Other Information None. Part III Item 10. Directors, Executive Officers, and Corporate Governance Incorporated herein by reference to the subsection entitled “Codes of Conduct and Ethics” under the section entitled “Corporate Governance,” “Nominees for Election as Directors,” “Continuing Directors and Executive Officers,” “Share Ownership” and the subsection entitled “Committees of the Board” under the section “Board and Committee Membership” in the Registrant’s Proxy Statement relating to its Annual Meeting of Shareowners to be held April 24, 2008. Item 11. Executive Compensation Incorporated herein by reference to the sections entitled “Executive Compensation” and “Director Compensation” in the Registrant’s Proxy Statement relating to its Annual Meeting of Shareowners to be held April 24, 2008. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareowners Matters Equity Compensation Plan Information Our 2005 Associate Incentive Plan, 2005 Associate Stock Purchase Plan, and 2005 Director Stock Purchase Plan were approved by our shareowners. The following table provides certain information regarding our equity compensation plans as of December 31, 2007.

Plan Category

Number of securities to be issued upon exercise of

outstanding options, warrants and rights

Weighted-average exercise price

of outstanding options, warrants and rights

Number of securities remaining available

for future issuance under equitycompensation plans (excluding

securities reflected in column (a)) (a) (b) (c) Equity Compensation Plans Approved by Securities Holders

60,384(1) $32.83 1,410,930(2)

Equity Compensation Plans Not Approved by Securities Holders

- - -

Total 60,384 $ 32.83 1,410,930 (1) Includes 60,384 shares that may be issued upon exercise of outstanding options under the terminated 1996 Associate

Incentive Plan. (2) Consists of 814,108 shares available for issuance under our 2005 Associate Incentive Plan, 533,938 shares available for

issuance under our 2005 Associate Stock Purchase Plan, and 62,884 shares available for issuance under our 2005 Director Stock Purchase Plan. Of these plans, the only plan under which options may be granted in the future is our 2005 Associate Incentive Plan.

For additional information about our equity compensation plans, see Stock Based Compensation in Note 11 in the Notes to the Consolidated Financial Statements. The other information required by Item 12 is incorporated herein by reference to the section entitled “Share Ownership” in the Registrant’s Proxy Statement relating to its Annual Meeting of Shareowners to be held April 24, 2008.

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Item 13. Certain Relationships and Related Transactions, and Director Independence Incorporated herein by reference to the subsections entitled “Related Person Transaction Policy” and “Transactions With Related Persons” under the section entitled “Executive Officers and Transactions with Related Persons” and the subsection entitled “Independent Directors” under the section entitled “Corporate Governance” in the Registrant’s Proxy Statement relating to its Annual Meeting of Shareowners to be held April 24, 2008. Item 14. Principal Accountant Fees and Services Incorporated herein by reference to the section entitled “Audit Fees and Related Matters” in the Registrant’s Proxy Statement relating to its Annual Meeting of Shareowners to be held April 24, 2008.

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PART IV The following documents are filed as part of this report 1. Financial Statements

Reports of Independent Registered Public Accounting Firms Consolidated Statements of Income for Fiscal Years 2007, 2006, and 2005

Consolidated Statements of Financial Condition at the end of Fiscal Years 2007 and 2006

Consolidated Statements of Changes in Shareowners’ Equity for Fiscal Years 2007, 2006, and 2005

Consolidated Statements of Cash Flows for Fiscal Years 2007, 2006, and 2005

Notes to Consolidated Financial Statements

2. Financial Statement Schedules

Other schedules and exhibits are omitted because the required information either is not applicable or is shown in the financial statements or the notes thereto.

3. Exhibits Required to be Filed by Item 601 of Regulation S-K

Reg. S-K Exhibit Table Item No. Description of Exhibit 2.1 Agreement and Plan of Merger, dated as of February 3, 2005, by and among Capital City Bank Group,

Inc., First Alachua Banking Corporation, and First National Bank of Alachua (the schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K) - incorporated herein by reference to the Registrant’s Form 8-K (filed 2/9/05) (No. 0-13358).

3.1 Amended and Restated Articles of Incorporation - incorporated herein by reference to Exhibit 3 of the Registrant’s 1996 Proxy Statement (filed 4/11/96) (No. 0-13358).

3.2 Amended and Restated Bylaws - incorporated herein by reference to Exhibit 3.2 of the Registrant’s Form 8-K (filed 11/30/07) (No. 0-13358).

4.1 See Exhibits 3.1, and 3.2 for provisions of Amended and Restated Articles of Incorporation and Amended and Restated Bylaws, which define the rights of its shareowners.

4.2 Capital City Bank Group, Inc. 2005 Director Stock Purchase Plan - incorporated herein by reference to Exhibit 4.3 of the Registrant’s Form S-8 (filed 11/5/04) (No. 333-120242).

4.3 Capital City Bank Group, Inc. 2005 Associate Stock Purchase Plan - incorporated herein by reference to Exhibit 4.4 of the Registrant’s Form S-8 (filed 11/5/04) (No. 333-120242).

4.4 Capital City Bank Group, Inc. 2005 Associate Incentive Plan - incorporated herein by reference to Exhibit 4.5 of the Registrant’s Form S-8 (filed 11/5/04) (No. 333-120242).

4.5 In accordance with Regulation S-K, Item 601(b)(4)(iii)(A) certain instruments defining the rights of holders of long-term debt of Capital City Bank Group, Inc. not exceeding 10% of the total assets of Capital City Bank Group, Inc. and its consolidated subsidiaries have been omitted; the Registrant agrees to furnish a copy of any such instruments to the Commission upon request.

10.1 Capital City Bank Group, Inc. 1996 Dividend Reinvestment and Optional Stock Purchase Plan - incorporated herein by reference to Exhibit 10 of the Registrant’s Form S-3 (filed 01/30/97) (No. 333-20683).

10.2 Capital City Bank Group, Inc. Supplemental Executive Retirement Plan - incorporated herein by reference to Exhibit 10(d) of the Registrant’s Form 10-K (filed 3/27/03) (No. 0-13358).

10.3 Capital City Bank Group, Inc. 401(k) Profit Sharing Plan – incorporated herein by reference to Exhibit 4.3 of Registrant’s Form S-8 (filed 09/30/97) (No. 333-36693).

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10.4 2005 Stock Option Agreement by and between Capital City Bank Group, Inc. and William G. Smith, Jr., dated March 24, 2005 – incorporated herein by reference to Exhibit 10.1 of the Registrant’s Form 8-K (filed 3/31/05) (No. 0-13358).

10.5 2006 Stock Option Agreement by and between Capital City Bank Group, Inc. and William G. Smith, Jr., dated March 23, 2006 – incorporated herein by reference to Exhibit 10.1 of the Registrant’s Form 8-K (filed 3/29/06) (No. 0-13358).

10.6 Capital City Bank Group, Inc. Non-Employee Director Plan, as amended – incorporated herein by reference to Exhibit 10.2 of the Registrant’s Form 8-K (filed 3/29/06) (No. 0-13358).

10.7 Form of Participant Agreement for the Capital City Bank Group, Inc. Long-Term Incentive Plan – incorporated herein by reference to Exhibit 10.1 of the Registrant’s Form 10-Q (filed 8/10/06) (No. 0-13358).

11 Statement re Computation of Per Share Earnings.*

14 Capital City Bank Group, Inc. Code of Ethics for the Chief Financial Officer and Senior Financial Officers - incorporated herein by reference to Exhibit 14 of the Registrant’s Form 8-K (filed 3/11/05) (No. 0-13358).

21 Capital City Bank Group, Inc. Subsidiaries, as of December 31, 2007.**

23.1 Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.**

23.2 Consent of KPMG LLP, Independent Registered Public Accounting Firm.**

31.1 Certification of CEO pursuant to Securities and Exchange Act Section 302 of the Sarbanes-Oxley Act of 2002.**

31.2 Certification of CFO pursuant to Securities and Exchange Act Section 302 of the Sarbanes-Oxley Act of 2002.**

32.1 Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

32.2 Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

* Information required to be presented in Exhibit 11 is provided in Note 13 to the consolidated financial statements under Part II, Item 8 of this Form 10-K in accordance with the provisions of FASB Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share.

** Filed electronically herewith.

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Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on March 17, 2008, on its behalf by the undersigned, thereunto duly authorized. CAPITAL CITY BANK GROUP, INC. /s/ William G. Smith, Jr. William G. Smith, Jr. Chairman, President and Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on March 17, 2008 by the following persons in the capacities indicated. /s/ William G. Smith, Jr. William G. Smith, Jr. Chairman, President and Chief Executive Officer (Principal Executive Officer) /s/ J. Kimbrough Davis J. Kimbrough Davis Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

96

Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on March 17, 2008, on its behalf by the undersigned, thereunto duly authorized. Directors: /s/ Dubose Ausley /s/ L. McGrath Keen, Jr. DuBose Ausley L. McGrath Keen, Jr. /s/ Thomas A. Barron /s/ Lina S. Knox Thomas A. Barron Lina S. Knox /s/ Frederick Carroll, III /s/ Ruth A. Knox Frederick Carroll, III Ruth A. Knox /s/ Cader B. Cox, III /s/ Henry Lewis III Cader B. Cox, III Henry Lewis III /s/ J. Everitt Drew /s/ William G. Smith, Jr. J. Everitt Drew William G. Smith, Jr. /s/ John K. Humphress John K. Humphress

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Exhibit 21. Capital City Bank Group, Inc. Subsidiaries, as of December 31, 2007. Direct Subsidiaries: Capital City Bank CCBG Capital Trust I (Delaware) CCBG Capital Trust II (Delaware) Indirect Subsidiaries: Capital City Banc Investments, Inc. (Florida) Capital City Services Company (Florida) Capital City Trust Company (Florida) First Insurance Agency of Grady County, Inc. (Georgia) FNB Financial Services, Inc. (Georgia) Southern Oaks, Inc. (Delaware) Capital City Mortgage Company (Florida) - Inactive

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Exhibit 23.1. Consent of Independent Public Accounting Firm We consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-18557, No. 033-60113, No. 333-18543, No. 333-120242, No. 333-36693) and Form S-3D (No. 333-20683) of Capital City Bank Group, Inc. of our reports dated March 13, 2008, with respect to the consolidated financial statements of Capital City Bank Group, Inc. and the effectiveness of internal control over financial reporting of Capital City Bank Group, Inc., included in this Annual Report (Form 10-K) for the year ended December 31, 2007.

/s/ Ernst & Young, LLP Birmingham, Alabama March 13, 2008

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Exhibit 23.2. Consent of Independent Registered Public Accounting Firm The Board of Directors Capital City Bank Group, Inc.: We consent to the incorporation by reference in the registration statements (No. 333-18557, No. 033-60113, No. 333-18543, No. 333-120242, and No. 333-36693) on Form S-8 and No. 333-20683 on Form S–3D of Capital City Bank Group, Inc. of our report dated March 14, 2007, with respect to the consolidated statement of financial condition of Capital City Bank Group, Inc. and subsidiary (the Company) as of December 31, 2006 and the related consolidated statements of income, changes in shareowners’ equity, and cash flows for the years ended December 31, 2006 and 2005, which report appears in the December 31, 2007, annual report on Form 10–K of Capital City Bank Group, Inc. Our report with respect to the consolidated financial statements of the Company refers to the Company’s adoption of the provisions of Statement of Financial Accounting Standards (SFAS) No. 123R, Share Based Payment, as of January 1, 2006, SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132R, as of December 31, 2006 and Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, as of January 1, 2006. /s/ KPMG LLP Orlando, Florida March 14, 2007 Certified Public Accountants

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Certification of CEO Pursuant to Securities Exchange Act

Rule 13a-14(a) / 15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, William G. Smith, Jr., certify that:

1. I have reviewed this annual report on Form 10-K of Capital City Bank Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ William G. Smith, Jr. William G. Smith, Jr. Chairman, President and Chief Executive Officer Date: March 17, 2008

101

Certification of CFO Pursuant to Securities Exchange Act

Rule 13a-14(a) / 15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, J. Kimbrough Davis, certify that:

1. I have reviewed this annual report on Form 10-K of Capital City Bank Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ J. Kimbrough Davis J. Kimbrough Davis Executive Vice President and Chief Financial Officer Date: March 17, 2008

102

Certification of CEO Pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned certifies that (1) this Annual Report of Capital City Bank Group, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (this “Report”), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended, and (2) the information contained in this Report fairly presents, in all material respects, the financial condition of the Company and its results of operations as of and for the periods covered therein. /s/ William G. Smith, Jr. William G. Smith, Jr. Chairman, President and Chief Executive Officer Date: March 17, 2008

103

Certification of CEO Pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned certifies that (1) this Annual Report of Capital City Bank Group, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (this “Report”), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended, and (2) the information contained in this Report fairly presents, in all material respects, the financial condition of the Company and its results of operations as of and for the periods covered therein. /s/ J. Kimbrough Davis J. Kimbrough Davis Executive Vice President and Chief Financial Officer Date: March 17, 2008

Officers, Directors and Community Boards

Capital City Bank Group, inC.

Officers


Thomas A. BarronTreasurer

J. Kimbrough DavisExecutive Vice President and Chief Financial Officer

Flecia BraswellExecutive Vice President and Chief Brand Officer

Randall SharptonSenior Vice President

Directors

DuBose AusleyAttorney Ausley & McMullen, PA

Thomas A. BarronPresidentCapital City Bank

Frederick Carroll, IIIManaging PartnerCarroll and Company, CPAs

Cader B. Cox, IIICEORiverview Plantation Inc.

J. Everitt DrewPresidentSouthGroup Equities, Inc.

John K. HumphressPartnerWadsworth, Humphress, Holler & Konrad, PA

McGrath Keen, Jr.Private Investor

Lina S. KnoxCommunity Volunteer

Ruth A. KnoxAttorney/PresidentWesleyan College

Henry Lewis, III, PharmD, RPHProfessorFlorida A&M UniversityCollege of Pharmacy

William G. Smith, Jr.Chairman, President and Chief Executive OfficerCapital City Bank Group, Inc.

Capital City Bank

Officers

William G. Smith, Jr.Chairman of the Board

Thomas A. BarronPresident

J. Kimbrough DavisExecutive Vice President andChief Financial Officer

Flecia BraswellExecutive Vice President andChief Brand Officer

Randolph K. BrileyExecutive Vice President

Edward G. CanupExecutive Vice President

William D. ColledgeExecutive Vice PresidentMetroCommunity Banking

Bethany H. CorumExecutive Vice President andChief People Officer

Mitchell R. EnglertExecutive Vice President

Karen H. LoveExecutive Vice President

William L. Moor, Jr.Executive Vice President

Randolph M. PopleExecutive Vice President

Cynthia Y. PyburnExecutive Vice President

Dale A. ThompsonExecutive Vice President

Edwin N. West, Jr.Executive Vice President

William H. BrimacombeSenior Vice President

David CaldwellSenior Vice President

Charles J. DavisSenior Vice President

Judy GettsSenior Vice President

Jeri HunterSenior Vice President

John M. HutchisonSenior Vice President, Compliance

Ray A. JohnsonSenior Vice President, Finance Executive

Jep LarkinSenior Vice President, Controller

Robert K. MayerSenior Vice President

Richard C. McCollisterSenior Vice President

Walter McPhersonSenior Vice President

Michael PenneySenior Vice President

Helen ProctorSenior Vice President

John RaffertySenior Vice President

Ruben RamosSenior Vice President

David SandaSenior Vice President

James Y. ScarboroSenior Vice President

William P. Smith, Jr.Senior Vice President

Mark W. StricklandSenior Vice President

Emory F. SullivanSenior Vice President

Brian WimplingSenior Vice President

Drew Ferguson, IIIChairman, West Point

Gerald B. Andrews, Jr.PresidentTroup and Chambers Counties

Beverly Hickman-BlackPresidentBurke County

Clifton E. BradleyPresidentDixie, Gilchrist, Levy and Suwannee Counties

Roy L. CarterPresidentWashington County

Don L. DavisPresidentGainesville

Susan E. EverettPresidentTaylor County

Amy GeigerPresidentWakulla County

W.W. Gunnels, Jr.PresidentJefferson and Madison Counties

Donald L. JamesPresidentNW Alachua County

Stephen L. JukesPresidentBibb County

C. Stephen MartinPresidentCitrus County/Inglis

Terry McRaePresidentGrady County

Jeffrey L. OodyPresidentBradford and Clay Counties

Stephen StablerPresidentLaurens County

James R. SuberPresidentGadsden County

Gregory J. WalkerPresidentPutnam County

Johanna WhitePresidentGulf County

Directors

Daniel M. AusleyOwnerMASK Development


Gregory V. BeauchampAttorneyGregory V. Beauchamp, PA

Robert J. BeauchampCertified Public AccountantBeauchamp & Edwards, PA

Donald T. BenninkDairy Farmer/OwnerNorth Florida Holsteins

Kenneth R. HartPresidentAusley & McMullen, PA

E. Cantey HigdonInvestor

John B. HigdonInvestorHigdon Investment Co.

Harold M. KnowlesAttorney/Managing ShareholderKnowles & Randolph, PA

Blucher B. LinesAttorneyLines, Hinson & Lines

S. Craig McMillanPresident, Pat Thomas & Associates Insurance, Inc.

John B. MowellChairmanMowell Financial Group, Inc.

William G. Smith, Jr.Chairman, President and Chief Executive OfficerCapital City Bank Group, Inc.

Ben H. Wilkinson, Jr.PartnerTallahassee Land Company


Fred M. Williams, Jr.PresidentWilliams Timber, Inc.

P. Graves WilliamsPresidentQ. L. Enterprises, Inc.

SuBSiDiariES

Capital City Banc InvestmentsWilliam L. Moor, Jr.President

Capital City Services CompanyCynthia Y. PyburnPresident

Randall H. LashuaSenior Vice President

Mark NewmanSenior Vice President

Capital City Trust CompanyRandolph M. PoplePresident

Robert A. BarnettSenior Vice President

R. David Maloy, Jr.Senior Vice President

CoMMunity BoarDS

Bibb County Community BoardMarilyn L. AshmoreMuseum of Aviation Foundation

Charles K. Buafo, MDChief of Staff, Medical Center ofCentral Georgia

Dudley B. Christie, Jr., ODInvestor, Optometrist

Robert J. Cleveland, Jr.President, Vantage Homes, Inc.

Guy B. Eberhardt, Sr.President, Eberhardt Industries, Inc.

J. Milton Heard, IVPresident, Hart’s Mortuary

Paul R. NagleUnited Way of Central Georgia, Inc.

Edmund E. OlsonPresidentSports Towne/Macon Knights

James A. Upshaw, MDPartnerInternal Medicine Associates, P.C.

Bradford/Clay Counties Community BoardSteve DenmarkOwner, Denmark Furniture Store

Susan Faulkner-O’NealOwner, Faulkner Realty

William Marchese, DMDOwner, Bradford Family Dentistry

John M. MillerOwner/Publisher, Bradford County Telegraph

Douglas E. ReddishPartner, Reddish & White CPAs

Burke County Community BoardRickie BlackburnOwner, Delta Termite & Pest Control

Gregory CourseySheriff of Burke County

William E. EdwardsArea Distribution ManagerGeorgia Power Company

John Lee FulcherCPA/Owner, John L. Fulcher, CPA

William H. Harper, Jr.Owner, Harper Consulting, Inc.

C.W. HopperRetired, Burke County Commission

Robert H. McKinneyOwnerMcKinney Wholesale Company, Inc.

Bonnie TaylorGeneral Manager, The True Citizen

Citrus County Community BoardC.L. CallowayDistrict ManagerWithlacoochee River Electric Cooperative, Inc.

Dolores H. ClarkPresident/OwnerR&R Clark Construction, Inc.

Billy G. LaffertyPresident/OwnerTotal Rental Centers, Inc.

William M. LyonsSemi-Retired, Real Estate

Alana F. RichPublisherNature Coast Visitors Guide Magazine, Inc.

Gadsden County Community BoardJohn N. BertOwner/Editor, Havana Herald,Twin City News, and Havana Publishing

John Shaw CurryRetired Attorney

Michael DoonerPresidentSouthern Forestry Consultants

George HackneyOwner/PresidentHackney Nursery, Inc.

E.W. Hinson, Jr.Owner/PresidentHinson Oil Company

Alma Littles, MDProfessor/Assoc. Dean for Academic AffairsFSU College of Medicine

Terrance L. MasseyPresidentMassey Drugs

William M. MaxwellPresidentMaxwell & Suber Co.

Fount H. May, Jr.President, May Nursery, Inc.

W. Dale SummerfordTax CollectorGadsden County

Bruce H. ThomasPresidentThomas Motor Cars

Pat M. Woodward, MDRetired

Gainesville Community BoardNorma B. AdamsRealtor, Prudential Preferred Property

Alan A. Goldblatt, MDPresident/CEOAlan A. Goldblatt, MD, PA

William F. McDavidManaging Shareholder/PresidentMcDavid & Company, CPAs

Lee C. McGriffPresidentMcGriff Williams Insurance

Frank P. SaierVice President/PartnerScruggs & Carmichael

Dempsey R. Sapp, Jr.President/CEOFlorida Pest Control

Gilchrist County Community BoardTheodore M. BurtAttorney, Theodore M. Burt, PA

Howell E. Lancaster, Jr.President, Lancaster Oil

Gary E. RexroatPhysician’s AssistantChiefland Medical Center

Jimmie L. TrokeCo-Owner/REALTOR®, Troke Realty, Inc.

Grady County Community BoardJohn P. Bell, Jr.President/Owner, Bell Irrigation, Inc.

Jo Ann ButlerOwner, Joe McNair, Inc.

Phillip DrewPresident, Drew Oil Company, Inc.

Michael L. GainousOwner, Triple L. Timber

Ken LeGettePresident, Graco Fertilizer, Inc.

Sidney PridgenOwner, Center Drugs

Ray PrinceOwner, Prince Farms

Earl StuckeyOwner/President, Stuckey Construction, Inc.

John B. Wight, Jr.Retired nursery owner

Reverend Sylvester WilliamsPastor, Beulah Missionary Baptist Church

Gulf County Community BoardMark H. CostinOwner, St. Joe Ace Hardware

B. Phillip EarleyOwner/Operator, St. Joe Rental

J. Patrick Farrell, Jr.Owner/REALTOR®, St. Joe Realty

Shirley JenkinsTax Collector, Gulf County

Paula R. PickettDirector, Gulf County Tourist Development Council

Tommy PittsPort Director, Port St. Joe Port Authority

Eugene RaffieldVice President, Raffield Fisheries, Inc.

Clay SmallwoodPresident, St. Joe Timberland

Hernando/Pasco County Community BoardDavid T. AlbersonRetired, Capital City Bank

George M. Allen, Jr.Board of Trustees,Hernando Health Care

Gordon CoburnRetired

Carl A. FeddelerPresident, CA Feddeler, Inc., Real EstateBrokerage/Krysher-Delzer, Inc.

Michael J. KierzynskiCertified Public AccountantKierzynski & Associates, CPAs, PA

Randolph MazourekOwner, ARM Appraisal Service, Inc.

Robert MemoliOwner, Florida Luxury Realty, Inc.

Jefferson County Community BoardFrank BlowOwnerFantasia Enterprises

Teresa Diane FreemanPresident, Jefferson Builders Mart and Hardware, Inc.

Brian T. HayesAttorney, Brian T. Hayes, P.A.

Felix R. JoynerOwner, Joyner’s Travel Center

George W. MillerOwner, Miller Accounting

Thomas B. ScottOwner, Scott Septic Tank Service

Jerry P. Walton, Jr.Managing PartnerBig Bend Timber Services, LLC

Leon County Community BoardLawrence Carter, PhDAssociate Dean, Cooperative Extension & Outreach, Florida A&M University

J. Marshall ConradAttorney, Ausley & McMullen, P.A.

Kevin M. DavisREALTOR®,Real Estate Investor, Blue Chip Realty

Erin EnnisVice President—Finance and AdministrationResidential Elevators, Inc.

Fincher W. SmithRestaurant Owner, McFinch Management, Co., K2 Urban Corporation

Roger C. SmithChairman, Prime Credit Corporation

Glenda L. ThorntonPartner, Foley & Lardner

Levy County Community BoardSharon C. BrannanOwner, Sharon C. Brannan, CPA, PA

Donald M. McCoy, Jr., DOPhysician, Nature Coast Medical Group

Robert E. Mount, Jr., DDSOwner, Robert E. Mount, Jr., DDS, PA

Madison County Community BoardHenry N. DavisPresident, Davis Enterprises

Frederick M. Norfleet, Sr.Pharmacist/Investor

Pam SchoellesPresident, Schoelles & Associates, Inc.

Lucas M. WaringOwner, Lucas Waring Enterprises, Inc.Odiorne Insurance Agency

Gary L. WilliamsOwner, Williams Electric

NW Alachua County Community BoardJerry M. SmithChairmanNW Alachua County Community Board

Ronald F. AndrewsPresident/OwnerAndrews Paving, Inc.

Gary D. GrunderAttorneyGrunder & Petteway, P.A.

Robert Alan HitchcockPresident/CEOHitchcock & Sons, Inc.

Patricia A. MoserPresidentHorizon Realty of Alachua, Inc.

Marilyn Bishop ShawLiterarcy CoachOak View Middle School

Putnam County Community BoardBruce A. BaldwinCEO, Putnam Community Medical Center

U.D. FloydOwner, U.D. Floyd Farms

Donald E. HolmesOwner, Donald E. Holmes, P.A.

Mildred G. HortonRetired, St. John’s Water Management District

Daniel A. MartinezRetired, Georgia Pacific Corporation

Randall S. MathewsPresident/CEOMathews’ Moving & Storage, Inc., et al.

R. L. McLendon, Jr., PhDPresident, St. Johns River Community College

E. David Risch, MDOrthopedic Surgeon, E. David Risch, MD, PA

Q. Irving RobertsPresident/Owner, Roberts Communications, Inc.Communications Products, Inc./Roberts Land & Timber Company, Inc.

Preston Breck SloanPresident, Beck Auto Sales, Inc.

Suwannee County Community BoardCharles E. HatchPresident, Hatch Brothers Farms, Inc.

Charles D. HurstPresident, C & D Farms, Inc.

Brian L. McAdams, DVMCo-Owner/President, McAdams Dairy Farm, Inc.

Robbie SuggsCo-Owner, North Florida Bio-Med

Taylor County Community BoardJames C. BassettPresident, Bassett Dairy Products, Inc.

Donald R. Everett, Sr.President, Ware Oil & Supply Co.

William R. GrantPresident, Perry Auto Supply, Inc.

Carl GrossPresident, CG Contractors, Inc.

Michael R. LynnPresident, Michael Lynn, Inc.

Grady C. Moore, Jr.President, Grady C. Moore Real Estate, Inc.

Joe R. Roberts, IIIChief Financial Officer, Roberts Lumber Co. &RDS Manufacturing Co.

Michael S. SmithAttorney, Smith, Smith & Moore, P.A.

Troup/Chambers County Community BoardCarter BrownReal Estate Broker, Coldwell Banker Spinks Brown Durand Realtors

Jerry CashOwner, Greene Super Drug

Thomas Ray EdwardsOwner, Valley Resale

A. Drew Ferguson, IV, DMDOwner, A. Drew Ferguson, IV, DMD, PC

L. Foy Fisher, IIIVice President/Human Resources,West Point Stevens

Edmund C. GloverChairman/CEO, Batson Cook Company

William L. NixAttorney/Owner, Morrow & Nix

C. Y. Wood, Jr.Editor/Publisher, Valley Times News

Wakulla County Community BoardTony C. BentonPresidentSperry & Associates

Traci B. CashCPATraci B. Cash CPA, LLC

Sonya HallOwner/Broker, Wakulla Realty, Inc. & Wakulla Property Management

George JohnstonRealtor/Real Estate Development Consultant, Coastwise Realty, Inc.

Frances Casey LoweAttorneyFrances Casey Lowe, PA

Washington County Community BoardJames Edwin DavisOwner, Davis Angus, Inc.

Margaret GilmoreSecretary/Treasurer,Blackburn Properties, Inc.

Rebecca J. HarrisBranch ManagerAssociated Land Title Group, Inc.

James T. PeelVice President of Engineering and OperationsWest Florida Electric Cooperative

Robert W. Snare, MDPhysician, Robert W. Snare, MD

Emeritus BoardAshley P. BeggsNed P. BraffordC. Bob ButlerDonald E. GrantSumpter JamesDamon D. KingWilliam W. MahaffeyT. Baldwin Martin, Jr.James T. McNeillPayne H. Midyette, Jr.G. Ulmer MillerJohn L. MillerM. William MillerHarold MillsJohn T. Mitchell, Sr.William L. MoorMillard J. NoblinJames M. PaffordJohn H. Parker, Jr., MDWesley RamseyJack G. RichRodney L. ScarboroGeorge A. StephensGiles C. Toole, Jr.Mary M. WhatleyEarlene U. WheelerWarren Winkler


alaBaMa

Chambers CountyFob James Office 375 Fob James Drive Valley, AL 36854 334.756.8550

Shawmut Office3503 20th AvenueValley, AL 36854334.768.5410

FloriDa

Alachua CountyAlachua Office15000 Northwest 140th StreetAlachua, FL 32615386.462.1041

Main Street Office4000 North Main StreetGainesville, FL 32609352.375.6991

Millhopper Office4040 Northwest 16th BoulevardGainesville, FL 32605352.336.1041

Northwood Office6360 Northwest 13th StreetGainesville, FL 32653352.371.1041

West Newberry Road Office5200-A West Newberry RoadGainesville, FL 32607352.372.1336

High Springs Office660 Northeast Santa Fe BoulevardHigh Springs, FL 32643386.454.5500

Jonesville Office14009 West Newberry RoadJonesville, FL 32669352.331.2605

Newberry Office24202 West Newberry Road, Suite FNewberry, FL 32669352.472.9950

Gainesville Residential Mortgage Lending3760 NW 83rd Street, Suite 2Gainesville, FL 32606352.395.1330

Commercial Real Estate Lending4041 NW 37th Place, Suite AGainesville, FL 32606

Bradford CountyStarke Main Office350 North Temple AvenueStarke, FL 32091904.964.7050

Citrus CountyCrystal River Office101 Southeast U.S. Hwy. 19Crystal River, FL 34429352.795.6100

Floral City Office7697 South Florida AvenueFloral City, FL 34436352.344.1555

Inverness Office1500 North U.S. Hwy. 41Inverness, FL 34450352.726.3200

Citrus Springs Office10241 North Florida AvenueCitrus Springs, FL 34434352.465.0035

Clay CountyKeystone Heights Office500 Green WayKeystone Heights, FL 32656352.473.4952

Dixie CountyCross City Office294 Northeast 210th AvenueCross City, FL 32628352.498.5536

Gadsden CountyChattahoochee Office316 West Washington StreetChattahoochee, FL 32324850.663.4355

Havana Office102 South Main StreetHavana, FL 32333850.539.5805

Quincy Office4 East Washington StreetQuincy, FL 32351850.875.1000

Gilchrist CountyBell Office690 South U.S. Hwy. 129Bell, FL 32619352.463.7660

Fanning Springs Office7240 U.S. Hwy. 19Fanning Springs, FL 32693352.463.6537

Trenton Office109 West Wade StreetTrenton, FL 32693352.463.2329

Gulf CountyPort St. Joe Office504 Monument AvenuePort St. Joe, FL 32456850.229.8282

Hernando CountyBrooksville Office7153 Broad StreetBrooksville, FL 34601

Suncoast Spring Hill Drive Office14302 Spring Hill DriveSpring Hill, FL 34609352.797.6700

Sunshine Grove Office14001 Cortez BoulevardBrooksville, FL 34613352.596.7258

Jefferson CountyMonticello Office800 South Jefferson StreetMonticello, FL 32344850.342.2515

Leon CountyApalachee Parkway Office1801 Apalachee ParkwayTallahassee, FL 32301850.402.8500

Apalachee Parkway East Office3513 Apalachee ParkwayTallahassee, FL 32311850.402.8300

Bradfordville Office6691 Thomasville RoadTallahassee, FL 32312850.402.8080

Capital Circle Northwest Office1456 Capital Circle NorthwestTallahassee, FL 32303850.402.8100

Centerville Road Office2375 Centerville RoadTallahassee, FL 32308850.402.8110

Lake Jackson Office3815 North Monroe StreetTallahassee, FL 32303850.402.8180

Mahan Office3255 Mahan DriveTallahassee, FL 32308850.402.8140

Main Office217 North Monroe StreetTallahassee, FL 32301850.402.7700

Metropolitan Office1301 Metropolitan BoulevardTallahassee, FL 32308850.402.8000

North Monroe Office2111 North Monroe StreetTallahassee, FL 32303850.402.7800

South Monroe Office3404 South Monroe StreetTallahassee, FL 32301850.402.8400

Tharpe Office1108 West Tharpe StreetTallahassee, FL 32303850.402.8370

Thomasville Road3528 Thomasville RoadTallahassee, FL 32308850.402.8340

Tennessee Street Office1828 West Tennessee StreetTallahassee, FL 32304850.402.8410

Westwood Plaza Office2020 West Pensacola StreetTallahassee, FL 32304850.402.8330

Levy CountyBronson Office140 East HathawayBronson, FL 32621352.486.2103

Cedar Key Office390 2nd StreetCedar Key, FL 32625352.543.5174

Chiefland Office2012 North Young BoulevardChiefland, FL 32626352.493.2571

Inglis Office95 West Highway 40Inglis, FL 34449352.447.2231

Williston Office144 East Noble AvenueWilliston, FL 32696352.528.5389

Madison CountyMadison Office343 West Base StreetMadison, FL 32340850.973.4161

Locations

Pasco CountyPort Richey Office10290 Regency Park BoulevardPort Richey, FL 34668727.842.8467

Putnam CountyPalatka Main Office200 Reid StreetPalatka, FL 32177386.329.1150

Palatka West Office4120 Crill AvenuePalatka, FL 32177386.329.1155

St. Johns CountyHastings Office207 North Main StreetHastings, FL 32145904.692.1221

Suwannee CountyBranford Office814 Suwannee AvenueBranford, FL 32008386.935.1112

Taylor CountyPerry Office115 West Green StreetPerry, FL 32347850.584.2057

Wakulla CountyCrawfordville Office2592 Crawfordville HighwayCrawfordville, FL 32327850.926.6740

Washington CountyChipley Office1242 Jackson AvenueChipley, FL 32428850.638.0510

GEorGia

Bibb CountyMacon Main Office455 Walnut StreetMacon, GA 31201478.749.6701

Macon Mall Office3535 Mercer University Center DriveMacon, GA 31204478.749.8021

Macon Northside Office3710 Northside DriveMacon, GA 31210478.749.8071

Bass Road Office1601 Bass RoadMacon, GA 31208478.474.2110

Hartley Bridge Office6200 Skipper RoadMacon, GA 31216478.788.6260

Burke CountyWaynesboro Office615 Liberty StreetWaynesboro, GA 30830706.437.2000

Waynesboro Drive-In243 6th StreetWaynesboro, GA 30830706.437.2017

Grady CountyCairo Main Office420 North Broad StreetCairo, GA 39828229.377.3002

Cairo Drive-In397 38th Blvd. NortheastCairo, GA 39828229.377.3003

Whigham Office126 East Broad AvenueWhigham, GA 31797229.762.4151

Laurens CountyDublin Main Office600 Bellevue AvenueDublin, GA 31021478.272.3100

Westgate Office1957 Veterans BoulevardDublin, GA 31021478.272.3100

East Dublin Office220 Central DriveEast Dublin, GA 31027478.272.3100

Thomas CountyThomasville Residential Mortgage Lending2024-D East Pinetree BoulevardThomasville, GA 31792229.227.0824

Troup CountyWest Point Main Office410 West 10th StreetWest Point, GA 31833706.645.2944

West Point Drive-In1100 3rd AvenueWest Point, GA 31833706.645.6227

SuBSiDiariES

Capital City Banc Investments420 N. Broad StreetCairo, GA 39828 229.378.8409

2012 N. Young Boulevard Chiefland, FL 32626 352.490.9004

814 Suwannee Avenue Branford, FL 32008 386.935.6868

1500 N. U.S. Hwy. 41 Inverness, FL 34450 352.726.3673

455 Walnut Street Macon, GA 31201 478.749.6735

200 Reid Street Palatka, FL 32177 386.312.9904

4 E. Washington Street Quincy, FL 32351 850.875.5555

105 West Jefferson Street Starke, FL 32091 904.964.7056

1801 Apalachee Parkway Tallahassee, FL 32301 850.402.8502

6691 Thomasville Road Tallahassee, FL 32312 850.906.5761

1301 Metropolitan Boulevard Tallahassee, FL 32308 850.402.8028

217 N. Monroe Street Tallahassee, FL 32301 850.402.7730

2111 N. Monroe Street Tallahassee, FL 30303 850.402.7849

615 Liberty Street Waynesboro, GA 30830 706.437.2006

14302 Spring Hill Drive Spring Hill, FL 34609 352.797.6705

600 Bellevue Avenue Dublin, GA 31021 478.274.9805

410 W 10th Street West Point, GA 31833 706.645.6262

Capital City Services Company1860 Capital Circle NE Tallahassee, FL 32308 850.671.0300

Capital City Trust Company217 N. Monroe Street Tallahassee, FL 32301 850.402.7750

455 Walnut Street Macon, GA 31201 478.749.6725

14302 Spring Hill Drive Spring Hill, FL 34609 352.797.6704

4 E. Washington Street Quincy, FL 32351 850.875.5555

4041 N.W. 37th Place, Suite A Gainesville, FL 32606 352.372.2384

Locations

Management Team

Shareholder Information

William G. Smith, Jr.Chairman, President and CEOCapital City Bank Group, Inc.


J. Kimbrough DavisExecutive Vice President andChief Financial Officer

Flecia BraswellExecutive Vice President andChief Brand Officer

Randolph K. BrileyExecutive Vice PresidentCorporate & Professional

Edward CanupExecutive Vice PresidentCommercial Real Estate Lending

William D. ColledgeExecutive Vice President MetroCommunity Banking

Bethany H. CorumExecutive Vice President andChief People Officer

Mitchell R. EnglertExecutive Vice PresidentCommunity Banking

Karen Love Executive Vice President Residential Lending

William L. Moor, Jr. Executive Vice PresidentPresident, Capital City Banc Investments

Randolph M. Pople Executive Vice President President, Capital City Trust Company

Cynthia Pyburn Executive Vice President President, Capital City Services Company

Dale A. Thompson Executive Vice President Credit Administration

Edwin N. West, Jr. Executive Vice President Sales Leadership

How to Communicate with Capital City Bank Group, Inc.

Telephone: 850.402.7000

Mailing address: P.O. Box 11248, Tallahassee, FL 32302

Internet address: www.ccbg.com

Direct automated: Tallahassee area 850.402.7500—toll free 888.671.0400

Direct client service center: Tallahassee area 850.402.7500—toll free 888.671.0400

Trust and Investment Management services: 850.402.7751

Corporate HeadquartersCapital City Bank Group, Inc.217 North Monroe StreetTallahassee, FL 32301850.402.7000

Transfer AgentAmerican Stock Transfer & Trust Co.59 Maiden LanePlaza LevelNew York, NY 10038800.937.5449

Trading Symbol: CCBGExchange: NASDAQ Independent Public AccountantsErnst & Young LLPBirmingham, AL General CounselAusley & McMullen, PATallahassee, FL Investor Relations ContactJ. Kimbrough DavisExecutive Vice President and Chief Financial Officer or Robert H. Smith, Vice PresidentCapital City Bank Group, Inc.850.402.7000 P.O. Box 11248Tallahassee, FL 32302 Annual MeetingApril 24, 2008, 10:00 a.m. University Center Club, Tallahassee, FL de

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217 North MoNroe StreettallahaSSee, Florida 32301850.402.7000www.ccbg.coM

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capital city bank group, inc. 2007 annual report

Documents

capital city bank associates

capital city team

capital city bankers

support of capital city

mission of capital city

ycapital city bank group

business partners

annual report page